ECB Holds Fire After 'Brexit'

The European Central Bank left its key interest rates unchanged in its first policy session after "Brexit", as euro area policymakers wait for more data to assess the exact depth of the impact of the historic event.

The bank maintained interest rates for a third straight policy session.

The 25-member Governing Council, led by ECB President Mario Draghi, left the benchmark interest rate - the refi, unchanged at a record low zero percent, after the policy session in Frankfurt.

Previously, the refi rate was kept unchanged in April, after a surprise five-basis point reduction in March.

The deposit rate was kept steady at -0.40 percent, where it has been since a 10 basis points reduction in March.

The marginal lending facility rate was maintained at 0.25 percent, after a five basis point-cut in March.

The Governing Council continues to expect the key ECB interest rates to remain at present or lower levels for an extended period of time, and well past the horizon of the net asset purchases, the bank said in a statement.

Further, the bank confirmed that the monthly asset purchases of EUR 80 billion are intended to run until the end of March 2017, or beyond, if necessary, and in any case until it sees a sustained adjustment in the path of inflation consistent with its inflation aim.

In the June 23rd referendum, 52 percent Britons voted to leave the European Union in a surprise move. "Brexit" is expected to create a huge negative shock for the U.K. economy, and simultaneously slow the euro area recovery.

Draghi is widely expected to signal more stimulus during his post-decision press conference set to begin at 8.30 am ET.

"Given widespread fears that the Bank is reaching its limits, he may also outline some of the specific policies that would allow further loosening, such as dropping the restriction that only bonds yielding above the deposit rate are eligible for purchase," Capital Economics economist Jennifer McKeown said.

"It is even possible that the bank will do away with its capital key restriction in favor of buying bonds in proportion to the stock of outstanding debt, but this is much less likely."

The bank began purchasing corporate bonds in June, under its asset purchase plan to buy EUR 80 billion bonds a month. The first of the four auctions under the second round of targeted longer-term refinancing operations, or TLTRO II, was held in June, in which about EUR 399 billion was lent. These loans will mature in four years.