The European Central Bank (ECB) kept interest rates unchanged as expected. The tone of the meeting was broadly balanced and no new information was delivered.
Mario Draghi acknowledged that economic momentum weakened during the last few months, but he emphasized that the ECB is still confident in the euro area’s economic health as growth remains solid and broad-based across countries. The recent slowdown should be temporary. The inflation reading is also unchanged, as inflation is still expected to converge to target over the medium-term. Headline inflation should stay at around 1.5% for the rest of year.
Regarding the Quantitative Easing program, ECB members refrained from discussing the end of the asset purchases and reiterated that they will continue buying 30 billion euros ($36 billion USD) of assets per month until at least the end of September. Furthermore, Mario Draghi signaled that investors should not pay attention to the recent drop in corporate bond buying.
That being said, the ECB medium-term outlook remains unchanged. We maintain our view that the asset purchases will come to an end this year.