European Central Bank meeting

Our guide to the European Central Bank (ECB) Governing Council announcement – including why it’s important for traders, and its role in shaping the European economy.

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European Central Bank meeting

Our guide to the European Central Bank (ECB) Governing Council announcement – including why it’s important for traders, and its role in shaping the European economy.

Call +41 (0) 58 810 77 42 to talk about opening a trading account. We’re here from Monday to Friday from 9am to 6pm.

Contact us: +41 (0) 58 810 77 42

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When is the next ECB meeting and interest rate announcement?

The Governing Council’s monetary policy meeting is held every six weeks, with the next meeting scheduled for Thursday 12 March 2020.

The council’s decisions are always announced via press release at 1.45pm CET on the day of the meeting, followed by an ECB press conference at 2.30pm CET.

See a full calendar of Governing Council meetings

How does the ECB meeting affect traders?

The ECB’s Governing Council is responsible for setting monetary policy, with the aim of achieving an inflation rate of just under 2% across the euro area. Governing Council meetings are important dates in traders’ calendars as they set the official interest rates for the eurozone.

The ECB requires national central banks (NCBs) in the eurosystem to use these rates for transactions with commercial banks. The three key rates are:

  • The minimum bid rate: the rate for one-week loans
  • The deposit rate: the rate paid on deposits held with NCBs
  • The marginal lending rate: the rate for overnight loans

In addition to setting these rates, the Governing Council can also apply quantitative easing (QE) as required. QE involves injecting money directly into the economy with the aim of boosting spending.

These policies have a strong influence on the interest rates set by commercial banks and other lenders, indirectly affecting spending and inflation across the eurozone.

Of course, traders and investors are particularly concerned about the impact of ECB policy on demand for stocks, bonds, currencies and other securities, which may cause them to change their strategies. Many traders will therefore try to predict which way monetary policy is heading ahead of each meeting.

Why is ECB monetary policy important to traders?

Traders look to gain an understanding of what monetary policy will be in the future. If they can get their predictions right, they can optimise their portfolios ahead of any announcement to maximise their profits and limit losses.

Traders expect interest rate hikes to cause ripple effects that will reduce the value of their stocks, bonds and other securities, but increase the value of the euro relative to other currencies. Conversely, lower interest rates or the implementation of quantitative easing is likely to have the opposite effect.

Traders will therefore look at the composition of the Governing Council, the distribution of voting rights between countries, and broader economic factors such as Brexit, to make predictions about which way the ECB will vote.

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What are the key ECB rate decisions?

The main way the Governing Council seeks to control inflation is by changing key European interest rates, including the minimum bid rate, deposit rate and marginal lending rate.

  1. Minimum bid rate

    The minimum bid rate is the rate national central banks (NCBs) in the eurosystem must charge for one-week loans. This is sometimes referred to as the main refinancing rate or ECB refi rate.

    This rate is the lowest rate at which commercial banks can borrow capital, effectively acting as the base rate of interest for the eurozone. It has a strong influence on the interest rates charged by commercial banks to businesses and consumers. This, in turn, will affect the amount of spending, borrowing and saving across the economy.

  2. Deposit rate

    The deposit rate is the rate of interest paid on overnight deposits made with NCBs in the eurosystem. If the rate is increased, commercial banks get a better return on money deposited with NCBs. All other things being equal, this should encourage them to deposit more funds with NCBs and give fewer overnight loans to other commercial banks in the system.

    The opposite is true if the rate goes down - banks get a lower return on any money deposited with the NCBs, which encourages them to deposit less money and give more overnight loans. The deposit rate is therefore another way the Governing Council can influence the supply of money in the economy.

  3. Marginal lending rate

    The marginal lending rate is the rate NCBs must charge commercial banks for overnight loans. These are loans used by banks to meet their reserve requirements for the day, ensuring they have enough cash to meet their clients’ needs.

    The ECB sets this rate above the minimum bid rate to penalise banks for borrowing emergency funds to meet their reserve requirements. The wider the gap – or corridor – between the marginal lending rate and deposit rate, the greater the penalty. This corridor therefore affects how conservative banks are with their capital, and how willing they are to give loans to commercial and retail clients. This, in turn, affects spending across the economy.

ECB meeting schedule

The Governing Council assembles twice a month in Frankfurt, Germany. It has two types of meetings: a monetary policy meeting, held every six weeks, and a non-monetary policy meeting in which it discusses the other responsibilities of the ECB. The meeting dates for 2020 are as follows.

ECB meeting calendar 2020

Monetary policy meeting and announcement Non-monetary policy meeting
23 January -
- 19 February
12 March -
30 April 1 April
- 20 May
4 June* 24 June
16 July 29 July
- -
10 September 23 September
29 October 7 October
- 18 November
10 December 2 December

*not in Frankfurt

Who are the key people on the Governing Council?

There are 21 voting rights to be shared between the 25 representatives on the Governing Council. All six members of the ECB’s executive board get a vote at each meeting and the remaining 15 votes are distributed between two groups:

  • Group 1: This includes the five countries with the largest economies. They share four voting rights, which rotate between countries on a monthly basis
  • Group 2: This includes the remaining 14 countries. They share 11 voting rights, which rotate between countries on a monthly basis

Analysts look to classify Governing Council members as either monetary hawks or doves with the aim of predicting future policy.

2020 committee members

Name Title Monetary outlook2
Christine Lagarde President of the ECB Neutral
Luis de Guindos Vice-president of the ECB Dove
Fabio Panetta Member of the executive board of the ECB Dove
Isabel Schnabel Member of the executive board of the ECB Hawk
Yves Mersch Member of the executive board of the ECB Hawk
Philip R. Lane Member of the executive board of the ECB and ECB chief economist Dove

Name Title Monetary outlook2
Jens Weidmann President, Deutsche Bundesbank Hawk
François Villeroy de Galhau Governor, Bank of France (Banque de France) Hawk
Ignazio Visco Governor, Bank of Italy (Banca d'Italia) Dove
Pablo Hernández de Cos Governor, Bank of Spain (Banco de España) Dove
Klaas Knot President, The Dutch Bank (De Nederlandsche Bank) Hawk

Name Title Monetary outlook2
Pierre Wunsch Governor, National Bank of Belgium (Nationale Bank van België) Neutral
Madis Müller Governor, The Bank of Estonia (Eesti Pank) Hawk
Gabriel Makhlouf Governor, Central Bank of Ireland Neutral
Yannis Stournaras Governor, Bank of Greece (Τράπεζα της Ελλάδος) Dove
Constantinos Herodotou Governor, Central Bank of Cyprus Dove
Mārtiņš Kazāks Governor, Bank of Latvia (Latvijas Banka) Neutral
Vitas Vasiliauskas Chairman of the Board, Bank of Lithuania (Lietuvos Bankas) Neutral
Gaston Reinesch Governor, Central Bank of Luxembourg (Banque Centrale du Luxembourg) Neutral
Mario Vella Governor, Central Bank of Malta Neutral
Robert Holzmann Governor, Oesterreichische Nationalbank Hawk
Carlos Costa Governor, Bank of Portugal (Banco de Portugal) Neutral
Boštjan Vasle Governor, Bank of Slovenia (Banka Slovenije) Dove
Peter Kažimír Governor, National Bank of Slovakia (Národná Banka Slovenska) Dove
Olli Rehn Governor, Bank of Finland (Suomen Pankki) Dove

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What is the Governing Council monetary policy meeting?

The aim of the Governing Council’s monetary policy meeting is to set key interest rates and other policies that will maintain price stability across the euro area. Maintaining price stability is the primary aim of the ECB itself according to the Treaty on the Functioning of the European Union, making the monetary policy meetings the most important in the ECB’s calendar.

The Governing Council defines ‘price stability’ as ‘a year-on-year increase in the Harmonised Index of Consumer Prices (HICP) for the euro area of below 2%.’ In the medium term the council aims to achieve an inflation rate close to, but below, 2%.

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1 Based on revenue excluding FX (published financial statements, June 2020).
2 The views of each member are not fixed and are likely to vary over time as a result of changes in the economy and the government’s inflation rate targets. This table illustrates where FOMC members are thought to stand at the time writing (9 October 2019).