ECB keeps base rate at zero

US, WASHINGTON (ORDO NEWS) — The European Central Bank (ECB) kept the base interest rate on loans at zero. The corresponding decision was made following a meeting of the ECB Governing Council, the regulator said.

In addition, the rate on deposits was kept at minus 0.5%, the rate on margin loans – at the level of 0.25%.

“The board of governors of the regulator expects that the ECB’s key interest rates will remain at their current or lower levels until it sees that the inflation forecast will steadily approach a level close enough, but below 2% within its forecast horizon,” explained in the bank.

The ECB will also maintain a € 750 billion bond repurchase program, which was expanded by € 120 billion in March. According to the ECB, this will support favorable financing conditions for the real sector of the economy in a period of increased volatility. The program will operate until the end of 2020, and until the regulator decides that the phase of the crisis in connection with the spread of coronavirus is complete.

The regulator’s message also notes that the purchase of assets may be increased as necessary.

The next meeting of the Governing Council of the ECB will be held June 4, 2020.

ECB Lending Programs

The ECB has also announced a softening of the terms of the Long-Term Targeted Financing Program (TLTRO III), loans that the regulator provides at low rates to banks in the eurozone.

As a result, credit organizations can provide customers with more favorable credit conditions, which stimulates the economy in the context of a temporary lack of financing due to the coronavirus. In particular, the Governing Council decided to reduce the interest rate on TLTRO III operations from June 2020 to June 2021 from minus 25 bp up to minus 50 bp from the average interest rate on ECB loans.

Moreover, for counterparties whose net lending reaches a certain threshold of efficiency, the interest rate for the program from June 2020 to June 2021 will be reduced to minus 50 bp from the average deposit rate.

The ECB has also announced a new emergency emergency lending program for banks in the context of a pandemic (PELTRO). The program is designed to support liquidity in the eurozone financial system and help maintain the smooth functioning of money markets by supporting liquidity. The European regulator will launch this program in May 2020.


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