Five Things to Know After Europe's Central Bank Thursday

By Paul HannonFeaturesDow Jones Newswires

Four of Europe's central banks announced policy decisions Thursday, the day following a fifth rate rise by the U.S. Federal Reserve, with promises of more to come in 2018. Each of the four showed continued caution, leaving policy unchanged. There were hints in Norway of an earlier move to follow the Fed, while European Central Bank President Mario Draghi hailed an improvement in the outlook for the eurozone economy even as inflation remains muted. Here are five takeaways from a busy, but ultimately passive day for the continent's monetary policy makers.

1. Post-crisis

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Mr. Draghi repeatedly stressed that what the eurozone is experiencing is no longer a mere "recovery" but instead an "expansion," a signal that for policy makers, the years of crisis management are definitely over. The central bank's economists see that expansion continuing at a strong pace in coming years, raising their 2018 growth forecast to 2.3% from 1.8%, and their 2019 forecast to 1.9% from 1.7%.

2. Missing inflation

Despite that stronger outlook, Mr. Draghi once again had to acknowledge that the inflation outlook is "muted." Indeed, the ECB's economists don't expect the inflation target of just below 2% being reached in either 2018 or 2019. This isn't an ECB-specific problem, but it helps explain why interest rates are set to stay where they are "for an extended period."

3. BOE

The U.K.'s central bank raised it's key interest rate for the first time in a decade last month, and Thursday confirmed it isn't in any hurry to follow that up. Policy makers face a unique challenge in the U.K.'s departure from the European Union in 2019, and the path for rates is therefore more uncertain than elsewhere in Europe.

4. SNB

Swiss policy makers are keeping an especially close eye on the ECB, since the franc's exchange rate against the euro is a key factor in the outlook for growth and inflation. A rise in the SNB's key rate is therefore unlikely before the ECB lifts its deposit rate. "To be very clear, it's too early to talk about normalization in the case of the Swiss National Bank," said Thomas Jordan, who heads the institution.

5. Norges Bank

Norway's central bank left its key interest rate unchanged at a record low of 0.5%, but signaled it is anticipating an earlier start policy normalization than previously. Policy makers said they now expect to raise the key rate for the first time in the second half of 2018, having previously said that was unlikely to happen before 2019.

Write to Paul Hannon at

(END) Dow Jones Newswires

December 14, 2017 10:27 ET (15:27 GMT)