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ECB Monthly Report: Rate cut to support recovery later in the year

FXstreet.com (Barcelona) - ECB Monthly Report for May 2013 includes information on the latest ECB meeting during which the Governing Council decided to reduce the interest rate on the main refinancing operations by 25bps to 0.5%.

It also recalls the decision to continue carrying out the main refinancing operations (MRO's) “as fixed rate tender procedures with full allotment for as long as necessary”, as well as the
three-month longer-term refinancing operations (LTROs) “to be allotted until the end of the second
quarter of 2014 as fixed rate tender procedures with full allotment.”

The Council expects inflation rates to be subject to volatility throughout the year, following the considerable decline in the annual Eurozone HICP from 1.7% in March to 1.2% in April. The ECB suggests that “underlying price trends should persist and, over the medium term, inflation expectations remain firmly anchored in line with price stability.” It expects inflation HCIP to rise by 1.7% in 2013 (versus the previous estimate of 1.8%), by 1.6% (vs 1.8%) in 2014 and by 1.8% (vs 1.9%) in 2015.

The Governing Council also points out that the Eurozone economy is still weak, but that it should start recovering later this year. The rate cut was carried out to support the recovery and the ECB will also maintain its accomodative monetary policy for that purpose. It sees 2014 GDP growing by 1% (vs 1.1%), while in 2015 it should increase by 1.6%.

The ECB also urged euro area national governments to increase their efforts to bring down government budget deficits and implement structural reforms in order to boost competitiveness, growth and employment.

Greece Unemployment Rate (MoM) (Feb): 27% vs 26.7% (Jan)

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