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The ECB keeps interest rates unchanged as Draghi says goodbye to Frankfurt

FRANKFURT AM MAIN, GERMANY – SEPTEMBER 12: Mario Draghi, President of the European Central Bank, arrives in Frankfurt am Main, Germany after a meeting of the Governing Council of the ECB on 12 September 2019 to speak to the media] Sean Gallup | Getty Images News | Getty Images

The European Central Bank (ECB) left interest rates unchanged on Thursday – marking Mario Draghi's last monetary policy meeting in the bank.

The central bank also maintained its forward directive, suggesting key interest rates will remain at their current or lower levels until there are strong signs of a pick-up in prices. The euro was relatively flat against the dollar at $ 1


"Incoming economic data continues to suggest moderate but positive growth in the second half of the year," Mario Draghi told reporters Thursday afternoon. He explained that the weakness of international trade is affecting euro area manufacturing activity and corporate investment.

The ECB expects a gross domestic product of 1.1% for this year and 1.2% for 2020. It also forecasts headline inflation of 1.2% and 1% for 2019 and 2020, respectively. The ECB's mandate is to keep inflation "below but close to 2%".

"A cross check of the outcome of the economic analysis with the signals from the monetary analysis has confirmed that a sufficient degree of monetary adjustment is still required," said Draghi on Thursday.

The Eurozone is experiencing lower growth rates due to global trade tensions, weaker manufacturing and other economic uncertainties such as Brexit.

In this context, the Frankfurt headquarters The central bank had last month announced a massive stimulus package to boost the euro area. This included a 10 basis point cut in the deposit rate, new credit terms for commercial banks and a second round of quantitative easing. The ECB's current deposit rate is -0.5%, the lowest in existence.

The decision to resume buying government bonds triggered a split within the central bank. The minutes of the meeting revealed that some of Draghi's colleagues disagreed with the decision.

Draghi, who is leaving the European Central Bank after eight years next week, told Annette Weisbach of CNBC that he was not worried that this split could hurt his legacy.

"Honestly, the answer is" no. "We have discussions, everyone has discussions, all jurisdictions have disagreements when discussing monetary policy decisions, and these disagreements are often made public, often not as part of the ongoing debate and ECB discussion.

The ECB reiterated on Thursday that the second round of QE will start on November 1 at a monthly pace of 20 billion euros ($ 22.3 billion) per month.

"The Governing Council expects to run as long as necessary to reinforce the accommodative effects of its key interest rates and end shortly before the ECB's key rate hike begins," the bank said in a statement.

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