ECB Meeting

• ECB adopts wait-and-see


• Draghi makes case for Italian lenders


• Eurozone stimulus not yet decided

The ECB today chose to adopt Mark Carney’s wait and see method in regard to any stimulus, they chose this approach deciding to wait for at least six weeks before choosing whether growth in the Eurozone requires any stimulus. ECB president, Mario Draghi, sounding indecisive stated that his staff would “continue to monitor economic and financial market developments very closely”. Greatly mystifying any line of action the Bank would decide to take in the coming months.

Analysts and investors never anticipated that actions would be taken today by the ECB, but looked to read between the lines of Draghi’s statement hoping for an insight into the actions that the ECB might take in the future, and they took Draghi’s comments that the ECB had the “readiness, willingness and ability”, as an significant indicator that further stimulus from the ECB is on its way.

Mario Draghi speaking for the rest of the ECB stated that in the next few months, they would be more accurately positioned to evaluate the state of the Eurozone economy and the aftermath of the Brexit on inflation and economic growth. He further added that if deemed necessary, the ECB would employ “instruments available within its mandate”, although not specified, conclusion can be drawn that there is a likelihood of fresh interest rate cuts, or even the possibility of its quantitative easing (QE) programme.

The ECB also decided at the meeting today that the interest rate on the main refinancing operations, the marginal lending facility and the deposit facility will stay the same at 0.00%, 0.25% and 0.40% respectively. The Governing Council of the ECB still expects these essential interest rates to maintain their current values or even edge lower for a prolonged period of time.

On the issue of non-standard monetary policy measures, the ECB governing council also agrees that the monthly purchases stated to be €80 billion will be set to run until the end of March 2017, or further if the need be, most likely until a substantial correction on the path of inflation conforming to its inflation target is achieved.

After Draghi’s previous comments at his monthly press conference, aimed at reducing fears of Italian lenders, who are said to have been pulled down by a major bad debt and non-performing loans problem, whose shares have also reflected a significant decline after the Brexit spurred concerns about solidarity in the EU. Draghi at the ECB meeting today stood behind a public bailout of Italy’s distressed banks who he said were “in exceptional circumstances”, as he praised the Eurozone for its relentless efforts in the wake of Britain’s decision to quit the EU.

Draghi then stressed a major aversion to fire sales hinting at banks’ being compelled to sell assets at extremely low prices as a result of the lack of a working market, stating that provisions were made within the current EU rules to make state support available to these banks. Italian Prime minister and EU Officials have somehow been unable to reach a deal on state aid for Italy’s lenders, especially for the Country’s third biggest bank Monte dei Paschi di Siena.