Breaking: ECB leaves rates unchanged, maintains guidance on interest rates and QE

• The ECB held rates and maintained its guidance on rates and QE, as expected, on Thursday. 
• The euro saw very minimal reaction, with focus now on ECB President Christine Lagarde's post-meeting press conference at 1330GMT. 

The European Central Bank opted to leave its deposit rate unchanged at -0.5% on Thursday as unanimously expected. The bank maintained its guidance on interest rates, saying they would remain at present or lower levels until the conditions for a rate hike have been met. The bank also reaffirmed its QE policy guidance from December; that the PEPP will end in March, that in Q2 the APP will be lifted to EUR 40B per month, then tapered back to EUR 20B per month by Q4, while PEPP reinvestments will continue to the end of 2024. The bank also reaffirmed its guidance that QE purchase would end prior to any increases to interest rates. 

Market Reaction

The euro saw some minor knee-jerk weakness in wake of the policy decision, though much of this has now faded and EUR/USD continues to trade near pre-announcement levels just under 1.1300. Focus now shifts to ECB President Christine Lagarde's post-meeting press conference at 1330GMT. Markets want to know if the ECB has shifted its view on inflation at all in wake of recent upside inflation surprises for January.