ECB leaves interest rates unchanged. Downside risks, we will evaluate pandemic trends

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29 October 2020 No change in the ECB's interest rate policy: in fact, the Governing Council has decided to keep the interest rates on main refinancing operations, on marginal lending operations and on deposits with the central bank will remain unchanged at 0.00% respectively. at 0.25% and -0.50%.

The Governing Council "expects the key ECB interest rates to remain at or below current levels until it sees inflation prospects firmly converging to a level sufficiently close to but below 2% in its projection horizon and this convergence will not be reflected consistently in the dynamics of underlying inflation ".

The ECB's anti-pandemic bond purchase plan is confirmed at 1,350 billion euros.

This is what transpires from the ECB statement released at the end of today's board meeting in which the institute reiterates that "The horizon of net purchases within the Pepp will be extended at least to the end of June 2021, and, in any case, as long as the coronavirus crisis is over ". 

at 20 billion euros per month The ECB has confirmed the monthly pace of its securities purchase program, already underway before the pandemic crisis, on which it has decided on an additional temporary allocation at 20 billion euros a month of 120 billion euros until the end of the year.

These operations will "continue as long as necessary".

"The new Eurosystem staff macroeconomic projections exercise in December will allow for an in-depth review of the economic outlook and the overall risk picture. Based on this updated review, the Governing Council will recalibrate its tools,

where appropriate, in order to respond to the changing situation and to ensure that financing conditions remain favorable to support the economic recovery and counter the negative impact of the pandemic on the forecast inflation profile ".

This is what is stated in the statement released by the ECB at the end of the steering committee.

"This", adds the note, "will facilitate a stable convergence of inflation towards the target level, in line with its commitment to symmetry". 

The Governing Council "will continue to provide ample liquidity through its refinancing operations. In particular, the third set of targeted longer-term refinancing operations (Tltro III) remains an attractive source of funding for banks. supporting bank loans to businesses and households ". 

Press release: Monetary policy decisions https://t.co/E95sZmdt6S

- European Central Bank (@ecb) October 29, 2020

markets

After the data on GDP and US subsidies, European stock exchanges have remained in negative territory but reducing losses. And now, after the announcement of the ECB which confirmed the unchanged rates and the Pepp of 1,350 billion until June 2021, little moves appear. 

The euro falls below $ 1.17 after the ECB statement. The central bank leaves its monetary policy unchanged but warns that it will most likely ease it in December. In December, he writes in his statement, the ECB, in light of the current "clearly downward risks, we will evaluate the data including the dynamics of the pandemic, the prospects for the spread of a vaccine and developments in the foreign exchange market" and "will recalibrate its tools as appropriate ". The European currency changes hands at 1.1704 dollars, after a minimum of 1.1695 dollars. 

The Governing Council of the ECB was unanimous in assessing the impact of contagions and containment measures on growth and inflation which will remain negative until early 2021 and in believing "that it is it is necessary to act and therefore to recalibrate our instruments at the next meeting in December ". This was stated by the president of the ECB, Christine Lagarde.

"November will be a very bad month" for the Eurozone economy said Christine Lagarde, according to whom the Eurozone economy "has started to lose momentum since September". "We do not yet know what containment measures will be taken in November" adds Lagarde, who for this reason believes that it is "still difficult to say whether it will get better in December". 

It is "crucial" that the Next generation Europe plan is made "operational without delay". "We will use all the tools at our disposal and especially Pepp to address the situation." "We have already done this to stop the first wave and we will do it to stop the second wave." 

The recovery in the Eurozone "is losing momentum more than expected" and "the rise in infections presents new challenges to health systems and growth prospects". "In the current scenario of clearly downside risks, the Governing Council will carefully evaluate the new data arriving, including the dynamics of the pandemic, the prospects for the arrival of vaccines and developments in the exchange rate". Lagarde warns that the "manufacturing sector is quite solid", while the "services sector has visibly slowed down".