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ECB Keeps Rates, QE Unchanged; Launches First Strategy Review In 17 Years
As expected, the ECB announced that it is keeping its rates and QE (€20BN/month) unchnaged, reiterating the familiar forward guidance that "interest rates to remain at their present or lower levels until it has seen the inflation outlook robustly converge to a level sufficiently close to, but below, 2%", while QE will continue "for as long as necessary to reinforce the accommodative impact of its policy rates, and to end shortly before it starts raising the key ECB interest rates."
Notably, the Governing Council also announced that it would launch the first review of its monetary policy strategy for the first time since 2003 in a rethink after years of radical monetary stimulus struggled to revive inflation. The institution said it will provide details about the scope and timetable of the exercise in a press release today at 3:30 p.m. Frankfurt time, following Lagarde’s press conference.
As Bloomberg notes, her efforts to modernize the ECB include potentially resetting the inflation goal of “below, but close to, 2%,” studying alternative measures of price growth, and assessing its policy tools. She’s benefiting from signs that a deep manufacturing slump in the 19-nation economy is bottoming out before it causes greater harm to the labor market and consumer spending. That should allow policy makers to focus on the review, which will last most of the year and also tackle issues including financial stability, climate change and communication.
At today’s meeting the Governing Council of the European Central Bank (ECB) decided that the interest rate on the main refinancing operations and the interest rates on the marginal lending facility and the deposit facility will remain unchanged at 0.00%, 0.25% and -0.50% respectively. The Governing Council expects the key ECB interest rates to remain at their present or lower levels until it has seen the inflation outlook robustly converge to a level sufficiently close to, but below, 2% within its projection horizon, and such convergence has been consistently reflected in underlying inflation dynamics.
The Governing Council will continue to make net purchases under its asset purchase programme (APP) at a monthly pace of €20 billion. The Governing Council expects them to run for as long as necessary to reinforce the accommodative impact of its policy rates, and to end shortly before it starts raising the key ECB interest rates.
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, and in any case for as long as necessary to maintain favourable liquidity conditions and an ample degree of monetary accommodation.
The Governing Council also decided to launch a review of the ECB’s monetary policy strategy. Further details about the scope and timetable of the review will be published in a press release today at 15:30 CET.
The President of the ECB will comment on the considerations underlying these decisions at a press conference starting at 14:30 CET today.
https://www.zerohedge.com/markets/ecb-keeps-rates-qe-unchanged-launches-first-strategy-review-17-years
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Ukrainian PM Says $5.5 Billion IMF Deal Can Be Sealed by April
Ukraine can finalize a $5.5 billion loan from the International Monetary Fund in the first quarter, according to the eastern European country’s prime minister.
The government reached a staff-level agreement in December that needs sign-off from the Washington-based lender’s board following the completion by Ukraine of conditions known as prior actions.
“We don’t have any disputes,” Oleksiy Honcharuk said Wednesday in an interview on the sidelines of the World Economic Forum in Davos. “It’s a working process that requires some time.”
The government had hoped for preliminary approval of the loan in September, with President Volodymyr Zelenskiy looking to lift economic growth and attract foreign investors who view the IMF as a guarantor market-friendly reforms. But question marks over central-bank independence and legal challenges to the 2016 nationalization of the country’s biggest bank have delayed a pact with the fund.
Still on Ukraine’s to-do list is passing legislation to protect the state’s takeover of Privatbank from its billionaire former owners – a step that could be taken as soon as next month, according to Honcharuk. But after meeting IMF Managing Director Kristalina Georgieva, Honcharuk signaled that lifting a ban on the sale of farmland – a key plank in Zelenskiy’s economic overhaul – may not be needed to secure the loan.
“I won’t link directly the land reform with the IMF deal,” he said. “Land reform is the key reform of the president and the government.”
A court revamp and other structural reforms were discussed at the meeting with Georgieva, which Zelenskiy also attended, according to a statement on the presidential website. The government wants to spur economic expansion in the country of 42 million to 5%, compared with this year’s “conservative” forecast of 3.7%, Honcharuk said, suggesting an even faster pace is possible in the future. “There would be nothing extraordinary in 7% growth,” he said. “Ukraine is now the most interesting emerging market. The most serious and deep reforms are being implemented” here.
Supporting that view, Ukraine this week raised 1.25 billion euros ($1.4 billion) by selling Eurobonds with a record-low yield of 4.375%.
“We’re replacing more expensive debt with cheaper” debt, Honcharuk said. “Today’s placement will allow our budget to save 2 million hryvnia ($81,600) a day.”
https://www.bloomberg.com//news/articles/2020-01-23/ukrainian-pm-says-5-5-billion-imf-deal-can-be-sealed-by-april
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