For once, the outlook is improving.
The global economy is looking better than it has for several years right now, and Europe is no exception.
The ECB might as well maintain these rates; even if the inflation target for February was achieved at two percent.
These include - within weeks - the Dutch and French elections and the first meeting of G20 finance leaders since U.S. President Donald Trump took office.
The vast majority of economist polled by Reuters expect the European Central Bank to stay its hand, at least in the first half of the year, having done enough for growth to remain on the sidelines until the most contentious elections are over.Repeating its standard forward guidance, the European Central Bank said that it continues to expect its key interest rates to remain at present or lower levels for an extended period of time and well past the horizon of its net asset purchases. The ECB have kept the door open to hike the depo rate before QE ends - that fact alone will continue to keep bond markets under pressure. "Both times, the European Central Bank was taught a lesson, and it seems unlikely that the lender would want to jump the gun for a third time", Brzeski argued. In the course of the press conference, it nearly seemed as if some hawks were sitting under Draghi's desk and were fiddling with his papers.
The bank's deliberations may be heated.
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The European Central Bank has chose to keep its stimulus programs unchanged. It may also drop its reference to downside economic risks and let an ultra-cheap borrowing facility for banks expire as scheduled. "In addition, we now expect the deposit rate to be increased in 2018 by a cumulative 20bp, with the balance of policy risks skewed towards a scenario in which the deposit rate is at zero by the end of 2018".
"The euro is seen as the prerequisite of the common market - if there is no euro, there is no single market".
Indeed, the cost of insuring French government debt against default is up sharply, with five-year credit default swaps FRGV5YUSAC=MG on French debt doubling since the start of the year. Investor confidence in Europe's single currency area has risen to its highest level since August 2007 while economic output last month expanded at its fastest pace in almost six years.
White House trade adviser Peter Navarro in February said Germany was using a "grossly undervalued" euro to "exploit" the US and European Union, and this week said reducing the USA deficit with Germany was "one of the most difficult" trade issues. "Our monetary policy has been successful".
"From the current levels, financial markets are more vulnerable to a hawkish than a dovish tilt", Tuuli Koivu at Nordea said.