The European Central Bank stuck to its cautious script Thursday, confirming plans to wind down its bond purchases at the end of December, and repeating its pledge to keep interest rates steady at least through the summer of 2019.
Still, ECB President Mario Draghi cited some risks to the eurozone economy, including international trade, emerging markets and volatility in financial markets.
Here are five takeaways from the ECB’s decision and press conference.
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Slow and Steady
The ECB said it would purchase €30 billion ($35 billion) in bonds this month and then €15 billion monthly until the end of the year, when purchases should end. The purchases so far have totaled about €2.5 trillion since the program started in 2015. Interest rates—including a minus 0.4% deposit rate—will stay where they are “at least through the summer of 2019,” the ECB said.
Divergence, Divergence, Divergence
The gap between policy rates in the U.S.—where they are steadily rising—and the eurozone has been a dominant theme in financial markets. The gap should widen further in the coming months. The Fed’s policy rate is in a 1.75% to 2% range. Assuming it increases rates three or four times in the next year as Fed officials have suggested, it would be much higher than the ECB’s rate by the time the ECB starts its own tightening cycle.
Three of a Kind
The ECB said it expects overall inflation to average 1.7% this year, in 2019 and in 2020.The ECB’s inflation target is just below 2% over the medium term, so as long as inflation stays near these rates, the bank will be in no rush to tighten policy.
Softer Growth
The central bank shaved its forecasts for 2018 and 2019 gross domestic product growth by 0.1 percentage point each year compared with June, to 2% and 1.8% respectively. Those aren’t huge revisions, but they underscore the fact that Europe’s recovery is already showing signs of age, while the U.S. economy is storming ahead.
Different Strokes for Different Folks
The U.S. budget deficit has been climbing as a result of recent tax cuts and higher spending. Don’t look for Europe to follow that game plan if the ECB has its way. “Regarding fiscal policies, the broad-based expansion calls for rebuilding fiscal buffers,” Mr. Draghi said.
Write to Brian Blackstone at brian.blackstone@wsj.com