Christine Lagarde (R), President of the European Central Bank (ECB), and Vice-President Luis de Guindos (L)
Thomas Lohnes | Getty Images News | Getty Images
The European Central Bank kept its monetary policy unchanged on Thursday, but chose to slow the pace of net asset purchases as part of its pandemic emergency purchase program.
The Governing Council voted to keep the interest rate on the ECB’s main refinancing operations at 0%, the marginal lending facility at 0.25% and the deposit facility at -0.5%.
“Based on a joint assessment of financing conditions and inflation prospects, the Governing Council considers that favorable financing conditions can be maintained at a moderately lower rate of net asset purchases according to the (PEPP) than in the previous two quarters, “the ECB said in a statement.
Markets had been eagerly awaiting the Frankfurt institution’s latest political decision to find signs of an imminent outcome of the pandemic-era stimulus, amid rising inflation and strong economic growth.
The euro gained 0.2% against the dollar after the decision to trade around $ 1.1837, while European equities reduced previous losses.
The ECB has reiterated that interest rates will remain at their current or lower levels until inflation is seen to reach 2% “well ahead of the end of its projection horizon and sustainably over the rest of the horizon. projection “and until the ECB judges that inflation has stabilized at 2% in the medium term.
“This may also involve a transitional period in which inflation is moderately above target,” the ECB added.
High decade
Euro area inflation rose 3% in the decade in August and the GDP of the 19-member common currency bloc rose 2% in the second quarter, exceeding economists ’expectations.
The central bank’s pandemic emergency purchase program was implemented in March 2020 to support the eurozone economy through the Covid-19 crisis and will end in March 2022 with a potential total value of € 1.85 trillion ($ 2.19 trillion).
ECB policymakers have sounded contrasting tones about the danger of inflation remaining more than “transient,” as has been the general consensus among central banks around the world.
Some analysts have suggested that the ECB will announce the Covid-induced stimulus package reduction in December, with the US Federal Reserve indicating that it is likely to start shrinking by the end of the year.
ECB chief economist Philip Lane said in a recent interview that “September is a long way off” from the scheduled date for the PEPP’s conclusion, suggesting that a reduced announcement may still be a few months away.
The asset purchase program (APP) will continue at a monthly rate of 20 billion euros, the Governing Council confirmed. The central bank has used this program in combination with PEPP to maintain the 19-member economy.
“The Governing Council continues to expect monthly purchases of net assets under the APP to run as long as necessary to reinforce the accommodative impact of its policy rates and to end shortly before rates begin to rise. key interest of the ECB, “the statement said.