ECB pledges record low rates to reach 2% inflation

© Reuters. FILE PHOTO: The headquarters of the European Central Bank (ECB) in Frankfurt, Germany, March 12, 2016. REUTERS/Kai Pfaffenbach//File Photo

The European Central Bank pledged on Thursday to keep interest rates at record lows for even longer to help sluggish inflation in the euro zone rise back to its elusive 2% target.

Euro zone bank stocks rose after the statement, government bond yields ticked down while the euro briefly edged up before easing back to trade flat on the day.

For a text of the ECB statement:

COMMENTARY:

PIET HAINES CHRISTIANSEN, CHIEF STRATEGIST, DANSKE BANK, COPENHAGEN

"This is more aligned to the new strategy outcome rather than a new policy signal. I note the wording on bond buying is unchanged.

"The forward guidance is a bit more dovish and allows more easy policy. The recalibration is about the duration of support rather than the size of the support."

XIAN CHAN CHIEF INVESTMENT OFFICER ,WEALTH MANAGEMENT, HSBC

"The language used by the ECB is now more forceful, in the sense that it is tying interest rates to its 2% target to show its strength."

"This is a key development the ECB needed to make because markets going into the meeting were unconvinced it could successfully stimulate activity and inflation....The bank really needed to show how it could be more 'forceful or persistent' around forward guidance and it didn’t disappoint.

"This news should be a short-term positive for European stocks and the overall recovery trade, providing additional support especially amidst rising nerves over the Delta variant. The strong signal that the ECB will be keeping rates lower for longer is also an indication that the euro could trade lower."

ARNE PETIMEZAS, ANALYST AT AFS GROUP, AMSTERDAM

"As always, the ECB postpones all difficult decisions until the last minute. So we're not going to find out today about how they're going to phase out pandemic QE nor what happens to the TLTRO teaser rate or 'just' QE. We have to wait even longer for that."

STEPHANE EKOLO, GLOBAL EQUITY STRATEGST AT TRADITION:

"The main takeaway about ECB new guidance is that it sets a time frame in what kind of inflation outlook the central bank is willing to see/tolerate before starting tightening its policy."