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European Central Banks Lag Behind Federal Reserve

Summary

European central banks remain committed to loose policies.

overall yield spreads will continue to underpin the dollar.

All three European central banks making their latest announcements on Thursday left monetary policy unchanged with all decisions in line with consensus forecasts.

The Swiss National Bank left the repo rate at -0.75% and reiterated that it was too early to consider any adjustment in policy. The bank would also continue to intervene if necessary in order to prevent currency appreciation with the franc again described as highly valued despite some depreciation since the previous meeting.

The Bank of England maintained interest rates at 0.50% with a 9-0 vote in favour. The monetary policy committee stated that fourth-quarter growth could be slightly weaker than the previous quarter due to domestic factors and that inflation was close to a peak.

The ECB maintained its refi rate at 0.0% and there was no shift in forward guidance with rates expected to remain at current levels for an extended period. Bank President Draghi was optimistic surrounding the growth outlook and there was a notable upward revision to the 2018 GDP growth forecast, but there was only a small increase in the inflation forecast.

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