Draghi hails ‘solid’ growth as ECB keeps policy on hold

FRANKFURT: The European Central Bank kept policy unchanged on Thursday and ECB chief Mario Draghi played down concern over recent softness in the euro zone economy, leaving the door open to ending lavish bond purchases by the end of the year.

Having tweaked its guidance last month to reflect solid growth, Draghi argued that the economy remained strong, although he acknowledged evidence of a "pull-back" from exceptional growth readings seen around the turn of the year.

"Overall, however, growth is expected to remain solid and broad-based," he told a news conference after ECB policy-makers held their meeting.

"The underlying strength of the euro area economy continues to support our confidence that inflation will converge towards our inflation aim of below but close to 2 percent over the medium-term.

"The euro rose 0.3 percent to $1.2197 as Draghi spoke. With the 19-country bloc´s economy expanding for 20 straight quarters and millions of new jobs created, the main debate among policymakers is about how quickly to withdraw stimulus and preserve ECB firepower for the next downturn. In particular, policymakers 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 target.

With Thursday´s decision, the ECB´s bond purchases, aimed at stimulating growth and inflation through rock-bottom debt costs, will continue at 30 billion euros a month at least until the end of September, or beyond if needed to prop up inflation.

The deposit rate, currently the bank´s primary interest rate tool, will remain at -0.40 percent.

The main refinancing rate will stay at 0.00 percent.

Economists polled by Reuters ahead of the meeting expected bond purchases to end this year after a short taper and to see the first rate increase in the second quarter of 2019. Some, however, have started to flag risks of a delay.

Their 2018 growth forecasts were unchanged at 2.3 percent, but most economists polled said the trade dispute between the United States and China would also damage the euro zone economy.