MNI POLICY: ECB prepares for rate cuts, tiering, fresh APP

By Luke Heighton

     FRANKFURT (MNI) - The European Central Bank has begun work on assessing the

size and composition of fresh asset purchases, it announced Thursday, and will

also examine how to tier its deposit rate in a bid to combat persistent low

growth.

     Key interest rates were left unchanged, but forward guidance was revised to

indicate that they will remain "at their present or lower levels at least

through the first half of 2020," the ECB said in a statement following July's

meeting of the decision-making body - opening the door for a possible rate cut

as early as September.

     "The Governing Council has tasked the relevant Eurosystem Committees with

examining options," the statement continued, "including ways to reinforce its

forward guidance on policy rates, mitigating measures, such as the design of a

tiered system for reserve remuneration, and options for the size and composition

of potential new net asset purchases."

     "The Governing Council also underlined the need for a highly accommodative

stance of monetary policy for a prolonged period of time, as inflation rates,

both realised and projected, have been persistently below levels that are in

line with its aim," the statement read.

     "Accordingly, if the medium-term inflation outlook continues to fall short

of its aim, the Governing Council is determined to act, in line with its

commitment to symmetry in the inflation aim. It therefore stands ready to adjust

all of its instruments, as appropriate, to ensure that inflation moves towards

its aim in a sustained manner."

--MNI Frankfurt Bureau; +49-69-720-146; email: luke.heighton@marketnews.com

--MNI London Bureau; +44 203 865 3829; email: jason.webb@marketnews.com

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