FRANKFURT, Oct 25 (Reuters) - The European Central Bank kept its policy unchanged as expected on Thursday, staying on course to end bond purchases by the end of December and to raise rates sometime after next summer.
With inflation rebounding and growth on a five-year run, the ECB has been removing stimulus for much of this year, even if more recent growth indicators appear to show that the expansion is running out of steam and risks to the outlook are mounting.
But with the bank having already exhausted much of its firepower the threshold for any extension of its stimulus is high, requiring a major shock rather than the gradual slowdown that has characterized this year.
The bank also made no change to its policy guidance, first formulated in June and kept broadly unchanged through several meetings.
“The Governing Council expects the key ECB interest rates to remain at their present levels at least through the summer of 2019, and in any case for as long as necessary,” it said, repeating its guidance.
Attention now turns to ECB President Mario Draghi’s 1230 GMT news conference, at which he is likely to discuss the broader economic outlook and will be questioned about Italy’s budget fight with the European Commission.
Investors will also look to see if Draghi maintains the ECB’s long-standing stance that growth risks are broadly balanced or takes a more dovish view given a string of disappointing data.
With Thursday’s decision, the ECB’s rate on bank overnight deposits, which is currently its primary interest rate tool, remains at -0.40 percent.
The main refinancing rate, which determines the cost of credit in the economy, remained unchanged at 0.00 percent while the rate on the marginal lending facility — the emergency overnight borrowing rate for banks — remains at 0.25 percent. (Reporting by Balazs Koranyi; Editing by Catherine Evans)