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. The Governing Council of the European Central Bank is the primary decision-making body of the European Central Bank, which acts as the central bank of the eurozone.
Understanding the ECB Announcement
The European Central Bank (ECB) Announcements 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.
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 United States’ Federal Reserve Bank, the ECB does not have the mandate to promote maximum employment.
The council meets every two weeks in Frankfurt, Germany. One out of every three meetings is a monetary policy meeting, when the council may make changes. An ECB Announcement follows each of these meetings, along with a press conference, during which the European Central Bank President explains the decisions and takes questions from the press. Currently, the ECB President is Mario Draghi, serving in that role from 2011 through 2019.
Investors, speculators, and analysts will closely watch the European Central Bank (ECB) Announcements for any changes to the target interest rate for lending to the deposit facilities in the eurozone. These interest rates will 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.