ECB's Constancio: banks in better shape, must keep reducing bad loans

Draghi Faced Nowotny Plea to Discuss ECB Policy

The ECB's official monetary policy statement and actual policy settings remained unchanged, while ECB President Mario Draghi shrugged-off growth momentum fears but ultimately gave traders little reason to bid the Euro higher.

The bank's 25-member governing council said Thursday that it was holding its benchmark refinancing rate at a historic low of zero, with analysts not expecting the bank to deliver a fresh rate hike until around the middle of 2019.

Draghi used today's press conference to acknowledge that 'incoming information since our March meeting points towards some moderation'.

Overall, the bank's take was "caution tempered by unchanged confidence" that the economy was still on the upswing.

Mr Draghi said risks surrounding the euro area growth outlook remained broadly balanced but that "risks related to global factors, including the threat of increased protectionism, have become more prominent".

Recent economic indicators such as surveys of business executives or statistics on industrial production have suggested a slowing of growth in the first three months of the year.

In particular, they need to agree an end-date for the ECB's 2.55 trillion-euro ($3.10 trillion) bond purchase programme, which has cut borrowing costs and revived growth, even if it has failed to lift inflation back to the target.

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The yield has risen for six straight days - the longest upward run since September 2017, according to Reuters data.

The admission prompted a German journalist in the audience to question the president on "why monetary policy had not been discussed.in a monetary policy meeting", to which Draghi said that the European Central Bank first required a better understanding of the underlying trends since the start of the new year before formulating future policy.

Equity futures were tipping Nasdaq to open 0.4% higher while the other two indexes are seen only marginally higher.

Draghi said that some causes could be temporary, such as weather, strikes or calendar effects like the timing of Easter. That rate is minus 0.4 percent, meaning banks pay a penalty on the funds they deposit.

One worry is that protectionist rhetoric from the United States could push down the value of the dollar, an economic anomaly as the Federal Reserve is likely to raise interest rates several times this year, a natural support for its currency. The U.S. economy has moved ahead faster and the Fed's benchmark rate is now 1.5 percent, compared to zero for the European Central Bank.

Euro zone inflation is so weak that even after the creation of 9 million jobs since early 2013, measures of underlying price growth that strip out energy and food are barely rising.

Nonetheless, the euro's recent strength has had a relatively limited impact in recent weeks.

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