As expected, the European Central Bank decided to stop its 2.6T-euro bond-buying program. ECB President Mario Draghi confirmed the four years of quantitative easing program the Asset purchase program (APP) will end in Dec 2018.
The Governing Council intends to continue reinvesting in full, the principal payments from maturing securities purchased under the APP for an ‘extended period of time” past the date when it starts raising the key ECB interest rates.
In unfolding the outlook for the EA economy, Draghi said “Euro area real GDP increased by 0.2%, quarter on quarter, in the third quarter of 2018, following growth of 0.4% in the previous two quarters.” He raised concern on the latest data “The latest data and survey results have been weaker than expected.”
The Governing council high lightened “Residential investment remains robust.”
In macroeconomic projections, the outlook for GDP growth has been revised down in 2018 and 2019. “GDP increasing by 1.9% in 2018, 1.7% in 2019, 1.7% in 2020 and 1.5% in 2021.”.
Projections revised down for 2018 and 2019, but remains unchanged for 2020:
March meeting projections: GDP increasing by 2.4% in 2018, 1.9% in 2019 and 1.7% in 2020.
June meeting projections: GDP increasing by 2.1% in 2018, 1.9% in 2019 and 1.7% in 2020.
Sep meeting projection: GDP increasing by 2.0% in 2018, 1.8% in 2019 and 1.7% in 2020.
Dec meeting projection: GDP increasing by 1.9% in 2018, 1.7% in 2019, 1.7% in 2020 and 1.5% in 2021.
Overall, the outlook for GDP has been revised down for 2018 since March meeting, remains unchanged for 2019 until Sep but for 2020 the projections remain unchanged.
FX market reaction:
Post the headlines hit newswire EURUSD reaction was limited and closed the day with a moderate fall. It has failed against the 50MA again but maintained the current range 1.1440-1.1300.
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