Jan 24, 2020

ECB announces first policy review in 16 years, but little expected to change

Photo: Thomas Lohnes/Getty Images

European Central Bank governor Christine Lagarde said Thursday the central bank would begin its first strategic review in 16 years. However, Lagarde's praise for negative interest rates and the stimulus programs from her predecessor, Mario Draghi, has investors betting the ECB holds rates at the current level of -0.5% for at least 18 months.

Quick take: The ECB left policy unchanged at Thursday’s meeting, and Lagarde said interest rates would only be raised from negative territory when eurozone inflation "robustly" meets the central bank’s target of just under 2%.

Go deeper: European banks could continue to disappoint investors

Go deeper

Central banks have cut interest rates 800 times since the Great Recession

Illustration: Sarah Grillo/Axios

Mexico's central bank cut interest rates to 7% last week, marking the 800th interest rate cut by a central bank since the Lehman Brothers' bankruptcy in September 2008, Bank of America Global Research notes.

What's happening: The number of rate cuts from central banks have picked up steam since last year when the global economy's growth rate stumbled to its slowest since the financial crisis.

The market is expecting multiple rate cuts in 2020

Data: CME Group; Note: Chart does not include expectations below 5% for a rate hike in 2020; Chart: Andrew Witherspoon/Axios

Just four days into February, traders have thrown out the Fed's guidance that it will remain on the sidelines in 2020, and lined up bets for multiple U.S. interest-rate cuts.

What's happening: Fed fund futures prices show that as the coronavirus outbreak has worsened, expectations are rising that the Fed will take action, as policymakers did last year when the U.S.-China trade war began to ravage the manufacturing, trade and transportation industries.

Bank of England holds interest rates steady before Brexit

Governor of the Bank of England Mark Carney. Photo: Jonathan Bradt/POOL/AFP via Getty Images

The Bank of England held interest rates at 0.75% Thursday as governor Mark Carney, in his final policy meeting, said "the most recent signs are that global growth has stabilized."

Yes, but: The BOE cut its growth expectations for Britain to 1.1% for the next three years, down from 2019's 1.4%. The projections are England's lowest since World War II.