The European Central Bank ( ECB ) has decided to keep interest rates at their current historically low levels at its governing council meeting on Thursday. This strategy aimed at mitigating the effects of the crisis caused by the coronavirus, he added , will be maintained until “a solid convergence of inflation prospects is observed towards a level close enough, although lower, than 2% “.
The interest rate on the main refinancing operations and the interest rates on the marginal credit facility and the deposit facility will remain unchanged at 0.00%, 0.25% and -0.50%, respectively. .
In turn, the entity maintains its asset purchase policy, the so-called PEPP , with a total endowment of 1.85 billion euros at least until the end of March 2022 . In any case, it will remain “until the crisis phase of the coronavirus is considered to have ended.”
Purchases will be made flexibly “in accordance with market conditions and with a view to avoiding a tightening of financing conditions that is incompatible with the objective of counteracting the downward impact of the pandemic on the projected inflation path”, explains the ECB in a statement.
Following the council meeting, ECB President Christine Lagarde stated that the euro area economy ” could have contracted in the first quarter” and, based on available data, it appears to resume growth in the second. trimester.
The context, he explained, is still marked by the evolution of the pandemic and the vaccination process to alleviate the effects of the virus, with which the short-term risks remain high, but moderate in the medium term. Lagarde has insisted that the performance of the ECB is closely linked to the evolution of inflation as well as financial conditions.
At least until 2023
The governing council will continue to reinvest the principal of the securities acquired under the PEPP that expire at least until the end of 2023. In any case, the future extinction of the PEPP portfolio will be managed in such a way as to avoid interference with the appropriate orientation of monetary policy.
Net purchases under the Asset Purchase Program (APP) will continue at a monthly rate of € 20 billion . It will also continue to provide abundant liquidity through its financing operations.
Analysts and markets did not expect changes or news at the ECB meeting this month. Everyone has their eyes set on the June conclave for the possibility of changes in the debt purchase policy.
The minutes of the March 11 meeting, in which the president, Christine Lagarde, insisted on maintaining short-term risks from the crisis arising from the pandemic , show that the central bank does not intend to increase the total endowment of the Pandemic Emergency Purchase Program (PEPP) of € 1.85 trillion, which means that the increase in asset purchases at the end of March will have to be offset later. In addition, it was clear that the adjustment of these interventions will be reviewed on a quarterly basis.