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Market Commentary Update


The ECB left its benchmark refinancing rate on hold at 0.0% on June 2nd 2016 as widely expected. Both the deposit rate and the lending rate were also left steady at -0.4 percent and 0.25 percent respectively and the central bank confirmed it will start buying corporate bonds on June 8.euro-area-interest-rate

Policymakers reinforced that rates are expected to stay at present or lower levels for an extended period of time and raised growth and inflation forecasts for this year although warned Q2 2016 growth may be slower than anticipated.

The European Central Bank increased  Thursday its inflation forecast for 2016 although predicted that the growth in prices will remain below its target until 2018, in the face of the difficulties caused by the influence of cheap energy in  prices of other goods and services.
The ECB increased its inflation forecast for 2016 to 0.2 percent from 0.1 percent estimated in March, and maintained the 2017 forecast at 1.3 per cent, said the president of the ECB Mario Draghi during his presentation of quarterly forecasts.



For 2018, , the ECB maintained its forecast of  inflation rate at 1.6 per cent, which is still below its target close to 2 percent.
Inflation has been below the target for three years and is likely to remain below for another three years or more.
The Bank also made a slight adjustment of its forecast of GDP growth after the economy of the euro zone to behave better than expected in the first quarter and recent data indicate that the consumption is supporting well,  confidence is increasing and investment are rebounding.
For the current year, the central bank forecasts that the Eurozone economy to grow by 1.6%, two tenths above what was originally planned while the forecast for 2017 is stable in the 1.7 per cent and the 2018 reduces one tenth to 1.7 percent.


The Organisation for Economic Co-operation and Development (OECD) has downgraded its UK growth forecast to 1.7%, which is the slowest pace of growth since 2012. The OECD has downgraded the UK more than any other major advanced economy over fears that a vote to leave the EU, known as Brexit, would send shockwaves across the globe, according to the Telegraph. The OECD believes a vote to leave could trigger a financial shock of a similar magnitude to that seen at the height of the Eurozone crisis in 2011/12


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