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Is the European Central Bank Preparing for Policy Normalization?

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Apr. 27 2018, Updated 11:15 a.m. ET

The European Central Bank’s April meeting

In its April policy meeting on April 26, the ECB (European Central Bank) left policy measures unchanged. European interest rates were maintained, and the current asset purchase program was confirmed to continue at a monthly pace of 30 billion euros until the end of September 2018, or beyond if necessary. Main refinancing operation, marginal lending facility, and deposit facility interest rates will stay at 0.00%, 0.25%, and -0.40%, respectively.

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Draghi sticks to an optimistic narrative

ECB president Mario Draghi, in a post-meeting press conference, maintained the narrative of slowly removing additional stimulus and played down the Eurozone’s recent economic softening. Weaker-than-expected economic data from the area raised questions about the ECB’s tightening path. Whereas this meeting was not expected to gain much attention as economic projections were not being updated, Draghi’s policy comments stirred traders. To their disappointment, there were no comments about the bond (FIEE) buying program, which was left unchanged and unextended. Also, recent weakness was downplayed, leaving little reason for markets (VGK) to react aggressively.

Series overview

Throughout this series, we’ll discuss the outlook for European growth and inflation. We’ll review the reasons behind the euro’s (FXE) continued weakness and how European bond (GGOV) and equity (EUFN) markets have reacted to the ECB’s statements.

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