Statement

ETHENEA on the recent ECB meeting

Munsbach, 7 March 2019 – Today, the ECB followed the recent move by the OECD and announced a downwards revision in its 2019 growth estimate for the eurozone, lowering it from 1.7% to 1.1%. During his press conference, Mario Draghi added that although the eurozone economy is still expanding, it is doing so at a weaker pace. This adjustment coupled with a reduced inflation forecast led the ECB to announce an additional TLTRO (Targeted Longer-Term Refinancing Operation) to provide banks with continued cheap funding. As a result, key interest rates will remain at their current record low levels at least until the end of this year. Following the ECB’s announcement, bond markets in the eurozone experienced significant gains, led by sovereign bonds. However, as the 10-year Bund yields are once again approaching the 0% barrier, further gains should be limited. The ECB also expects that “favourable financing conditions, further employment gains and rising wages” will further support the expansion of the economy in the eurozone. This supports the view that the first rate hike by the ECB will be in the first half of 2020.