ECB leaves policy unchanged, drops reference to 'lower rates'

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At 5:15 Easter hours, the euro was trading at 1.128 against the dollar and by 6:30 Eastern hours, the euro was down to 1.12 against the dollar.

It was later found that the euro suffered the move over a leaked inflation report, which was scheduled for publishing, during the interest rate decision of the European Central Bank (ECB).

The bank took a tiny step toward an eventual exit from the stimulus by dropping wording in its statement saying it could lower interest rates even further.

That's a sign of greater confidence in the economy, which is growing at a two-year high, confidence that ECB President Mario Draghi echoed in subsequent comments.

The evidence is piling up that the growth in the eurozone has kicked into a higher gear and the region is recovering from the Great Recession and the ensuing crisis over high debt that pushed some eurozone countries, notably Greece, to the brink of bankruptcy.

The euro zone economy grew by more than previously estimated in the first quarter and at its fastest rate in a year, European Union statistics agency Eurostat said today.

In previous statements, the European Central Bank had said it expected rates "to remain at present or lower levels for an extended period of time".

But the bank trimmed inflation forecasts for the next three years and said "substantial" amounts of stimulus through its unprecedented asset purchase scheme were still needed.

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Analysts expect that provision to be dropped in coming months as the bank edges toward announcing how it will phase out the bond purchases next year.

"Growth is so good, core inflation is so low", Michael Krautzberger, BlackRock's London-based head of European fixed income, said on Bloomberg TV on Thursday.

Though inflation in the eurozone is higher than it was for much of the past two years, that's largely because of a pick-up in oil prices. Inflation was expected to hit 1.7 per cent this year, 1.6 per cent in 2018, and 1.7 per cent in 2019.

All told, eurozone growth during the first quarter was double that of the USA, a welcome development for the central bankers at the ECB ahead of their latest policy decision Thursday afternoon in Tallinn, Estonia.

But the bank's announcement Thursday reiterated that its stimulus in the form of monthly bond purchases could be stepped up if the economic outlook worsens. The measure pumps newly printed money into the economy in an effort to raise inflation toward the bank's goal of just under 2 percent considered best for the economy.

The bank kept its short-term benchmark rate at a record low of zero. The ECB's refinancing rate remains 0%, while the rate paid on deposits left overnight at the central bank was held at minus 0.4%. That is in effect a tax aimed at pushing them to lend the money instead of hoard it.

The issue the ECB's policymakers must confront when they meet in Tallinn on Thursday is whether the recovery is strong enough to manage without so much monetary stimulus - whether in the words of one, it has attained escape velocity.

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