adminAs widely expected, the ECB did not announce any changes in interest rates for the 17 countries that share the euro, which have been held at their current record low levels since July 2012.
And ECB watchers said they did not expect any other policy measures to be announced by central bank chief Mario Draghi at his usual monthly post-meeting news conference.
Instead, attention would focus on what Draghi would have to say about the situation in Cyprus, analysts said.
The decision not to cut borrowing costs any further “probably reflects a view that a cut would not help rather than a belief that more policy support is not needed”, said Capital Economics economist Jennifer McKeown.
“After all, the business surveys have deteriorated again since the bank’s last meeting, suggesting that the recession might have deepened even before the effects of the Cyprus crisis were known,” the expert said.
Draghi could still bolster confidence slightly by hinting at future unconventional policy support during the press conference, McKeown suggested.
“However, he is likely to reiterate that any sovereign bond purchases will come only after the government in question has applied for an EU bailout and accepted the associated strict fiscal conditions.
Accordingly, doubts over the ECB’s willingness to do ‘whatever it takes’ to save the euro seem likely to grow,” McKeown said.
Newedge Strategy analyst Annalisa Piazza believed that while the case for further rate cuts was stronger, with signs that the eurozone economy is entering another period of recession, “we suspect Draghi will avoid to announce further non-standard measures today.”
The Italian central banker would likely adopt “a rather dovish tone, mainly based on the development of activity. If anything, Draghi will reiterate that the ECB will maintain a very accommodative stance and that a rate cut has been discussed today,” she added.
Last month, Draghi joked that “every week there is a new angst” and ECB watchers were convinced that following the widespread confusion over the Cyprus bailout, it would fall to Draghi, once again, to calm resurgent market fears.
There had been much “hysteria, hullabaloo and hyperbole” in the markets since the Cyprus parliament rejected the tough terms of a bailout package with its international lenders, but the “much hyped contagion (was) conspicuous by its absence,” said Royal Bank of Scotland economist Richard Barwell. – AFP.
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