What is the ECB Announcement
An ECB Announcement refers to the publication of any changes to monetary policy made by the governing council of the European Central Bank (ECB). The governing council is the primary decision-making body of the ECB, which acts as the central bank of the eurozone.
Understanding the ECB Announcement
ECB Announcements are part of the bank’s communication strategy, which seeks to harmonize the public's perceptions of ECB monetary policy with its actions in financial markets.
The mandate of the ECB is to maintain price stability, which it has defined as 2% inflation as measured by the Harmonized Index of Consumer Prices (HICP). Unlike the Federal Reserve Bank in the United States, the ECB does not have the mandate to promote maximum employment.
The council meets every two weeks in Frankfurt, Germany. One of every three meetings is a monetary policy meeting, when the council may make changes. An ECB Announcement follows each meeting, along with a press conference, during which the ECB president explains its decisions and takes questions from the press. The current ECB president is Christine Lagarde, whose term runs from November 2019 through October 2027.
Investors, speculators and analysts will closely watch ECB Announcements for any changes to the target interest rate for lending to the deposit facilities in the eurozone. These interest rates filter through to the rest of the economy, affecting interest paid on government, corporate and personal debt. In turn, interest rates influence the prices of other assets.
In 2014, the ECB announced its intention to lower interest rates on one of its principal lending facilities to below zero for the first time in history.
ECB Announcements and Quantitative Easing
Since the financial crisis, people have also watched announcements by the Governing Council of the ECB for changes to the bank’s asset purchase program. The purchase program was formed to help provide further liquidity for the European economy and help the ECB reach its inflation goals. However, the ECB has struggled to raise inflation to its 2% target.
In 2012, the ECB controversially expanded this program to include sovereign bonds, in a process also known as quantitative easing. The bank's announcements and press conferences are geared to reassure the public of the central bank’s commitments to this task. The bank plans to increase the level of inflation, even if that means indefinitely continuing to buy sovereign bonds in large quantities.
The European Central Bank reports of monetary policy are part of the bank’s communication strategy, which seeks to harmonize the public’s perceptions of ECB monetary policy with its actions in financial markets.