FRANKFURT (Reuters) – The European Central Bank pushed out the timing of its first post-crisis rate hike until 2020 at the earliest and offered banks new rounds of multi-year loans in a bid to revive the currency bloc’s slowing economy, it said on Thursday.
The bolder-than-expected move showed ECB was having to revisit plans to dial back its unprecedented stimulus measures as a global trade war, Brexit uncertainty and simmering debt concerns in Italy take their toll on a fragile euro zone.
While investors had long stopped pricing in an ECB rate hike this year, few were expecting the bank to change its policy message, causing yields on government bonds and the euro to fall after the announcement.
“The Governing Council now expects the key ECB interest rates to remain at their present levels at least through the end of 2019, and in any case for as long as necessary,” the ECB said in a statement.”
It had previously said rates would remain at their record low levels through the summer.
In addition, the ECB launched a third Targeted Long-Term Refinancing Operation (TLTRO III) consisting of two-year loans partly aimed at helping banks roll over 720 billion euros (618.6 billion pounds) in existing TLTRO and avoid a credit squeeze that could exacerbate the current economic slowdown.