• Historic decision The ECB slightly increases its inflation target for the Eurozone

Two weeks after announcing the historic change in its inflation target, the

European Central Bank (ECB)

has specified this Thursday what this change translates into and the most immediate thing is that interest rates will not only not rise, but could even go down to permanently secure the new price target, which now stands at 2%.

In other words, the entity will only raise interest rates when it sees that inflation reaches that level "long before the end of its projection horizon"

and only if it stays in it in a lasting way.

Until now, the ECB had indicated that the rate hike would occur when prices

"robustly"

converged

to their target

during the projection horizon.

According to the statement issued by the bank after the monthly meeting of its Governing Council in Frankfurt, the ECB wants to underline "its commitment to maintain a persistently accommodative monetary policy stance to meet its inflation target."

With that objective and in line with its monetary policy strategy, the Governing Council "expects the ECB's key interest rates to

remain at their current levels or lower until inflation reaches 2%

well before the end of its horizon. of projection and in a lasting way for the rest "of said period, which is set for 2023.

The conditions for raising rates also include that the progress of core inflation is "advanced enough" to be "consistent" with inflation stabilizing at 2% in the medium term.

"

This could imply a transitional period in which inflation is moderately above target,"

the statement added.

Thus, the reference interest rates for the ECB's refinancing operations remain at 0%;

the deposit facility rate will continue at -0.50% and the loan facility rate at 0.25%.

Rest of instruments

With respect to the rest of the monetary policy instruments, the ECB has made no changes.

It will continue to flexibly purchase assets within its

Pandemic Purchase Program (PEPP)

, endowed with a total purchasing capacity of € 1.85 trillion until March 2022. The ECB will revert to maturities under this program until the end of 2023.

The entity will also continue to make net purchases of assets under its standard program (APP) at a

monthly rate of 20,000 million net

"for as long as necessary" and will reinvest the funds of the debt that expires during a period of time "prolonged" after of interest rates starting to rise.

Lastly, the monetary authority has indicated that it will continue to provide "ample liquidity" through its refinancing operations, especially through the third program of long-term refinancing operations with a specific objective (TLTRO-III).

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