ECB keeps key rates unchanged

US, WASHINGTON (ORDO NEWS) — Following the April meeting, the European Central Bank (ECB) kept key interest rates unchanged, refraining from major changes in the parameters of its monetary policy.

The ECB left the interest rate on loans at zero. The Central Bank also kept the rate on deposits at minus 0.5% per annum, the rate on margin loans – at the level of 0.25% per annum.

“The Governing Council expects the ECB’s key interest rates to remain at their current or lower levels until it sees that the inflation forecast is steadily approaching a level close enough, but below 2% within its forecast horizon, and such rapprochement is consistently reflected in the dynamics of core inflation, “the regulator said in a statement.

The ECB has already launched a large-scale stimulus package to mitigate the economic impact of the pandemic.

On Thursday, the ECB decided to further soften the terms of operations of targeted long-term refinancing (TLTRO III). The interest rate on TLTRO III operations from June 2020 to June 2021 will be 50 basis points lower than the average rate used in the Eurosystem for basic refinancing operations, and not 25 basis points as before.

In addition, a new series of non-targeted long-term pandemic refinancing operations (PELTRO) will be conducted “to maintain liquidity conditions in the eurozone financial system and to help maintain the smooth functioning of the money markets.” PELTRO operations will begin in May 2020.

Meanwhile, the central bank did not change the asset purchase program, including actions from March emergency bond purchase program (Pandemic Emergency Purchase Programme, PEPP) in the amount of 750 billion euros.

“The Governing Council will conduct net purchases of assets under PEPP until it decides that the phase of the coronavirus crisis is over, but in any case, by the end of this year,” the regulator said. “The Governing Council is fully prepared to increase the size of PEPP and adjust its composition as much as necessary, and for as long as necessary. ”

Net purchases under the Asset Purchase Program (APP) will continue on a monthly basis in the amount of EUR 20 billion, together with purchases under an additional temporary package of EUR 120 billion until the end of the year.

“The reinvestment of principal payments from the repayment of securities acquired through APP will continue in full for a long period after the date on which the Governing Council begins to raise key interest rates of the ECB, and in any case so long as it is necessary to maintain favorable liquidity conditions and a sufficient degree of monetary stimulus, “the central bank said.

Earlier Thursday, preliminary Eurostat data showed that Eurozone GDP fell 3.8% in January-March compared with the previous quarter. This is the sharpest quarterly decline since data collection began in 1995.


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