European Markets Finish Mostly Lower After Central Banks Hold Firm

The majority of the European markets ended Thursday’s session with small losses. Central banks were in focus, as investors had their first opportunity to react to yesterday’s rate hike by the Federal Reserve. The European Central Bank, the Bank of England and the Swiss National Bank all decided to leave their respective interest rates unchanged today.

The European Central Bank left its monetary policy stance unchanged on Thursday. However, the ECB raised the euro area growth forecasts, as it gained confidence from the strong momentum this year, but inflation was seen to remain short of its target into 2020, which Mario Draghi called a “muted” news that warrants support from massive monetary stimulus.

However, an optimistic ECB President said the bank was more confident of inflation reaching its target of “below, but close to 2 percent” than it was two months ago.

In its latest round of macroeconomic projections, unveiled on Thursday, the ECB Staff raised the growth forecast for this year to 2.4 percent from 2.2 percent.

The outlook for next year was sharply lifted to 2.3 percent from 1.8 percent. The projection for 2019 was raised to 1.9 percent from 1.7 percent.

The Bank of England policymakers unanimously decided to leave its key interest rate unchanged on Thursday after tightening it for the first time in a decade in November.

The Monetary Policy Committee, headed by Governor Mark Carney, voted to maintain the benchmark rate at 0.50 percent. The bank had raised its rate by a quarter point at the previous session in November.

Policymakers voted unanimously to maintain the quantitative easing at GBP 435 billion.

The Swiss National Bank maintained its expansionary monetary policy stance on Thursday and reaffirmed its commitment to remain active in the foreign exchange market when necessary.

Further, the bank forecast inflation to exceed its target in three years’ time due to the weaker currency.

The pan-European Stoxx Europe 600 index weakened by 0.30 percent. The…

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