The Governing Council of the European Central Bank (ECB) has left monetary policy unchanged on Thursday, as analysts expected, keeping interest rates at historic lows after the last meeting (in December) strengthened the size and prolong the duration of the asset purchase program to combat economic and financial impacts.
“The Governing Board has decided to reconfirm the very accommodative position of monetary policy,” the ECB said in a statement.
Interest rates remained unchanged, with the rate applicable to major refinancing operations and the rates applicable to the marginal lending facility and the deposit facility remaining at 0% and 0.25%. and -0.5%, respectively.
On 10 December, the ECB strengthened the Pandemic Emergency Purchasing Program (PEPP) by € 500 billion to a total of € 1.85 billion, and extended the program period to March 2022. compared to the previous period of June 2021.
The central bank of the euro area at that time also extended long-term financing lines for banking until June 2022. This is the third series of TLTRO, an unconventional monetary policy instrument, through which the institution provides long-term bank loans, with the aim of favoring the granting of credit to companies and consumers and increasing liquidity.
The ECB expects the eurozone economy to shrink by 7.3% in 2020 and recover 3.9% this year. Christine Lagarde, President of the ECB, explained in December that the time the end of the PEPP is designed for a time, the first quarter of 2022, when the economy should recover “very seriously and take root”.
On 13 January, and in the context of the new general constraints on several countries, Lagarde said the ECB maintains its growth projections for the eurozone economy, despite restrictive measures to combat the pandemic, as long as these measures are eliminated by the end of March.
The central bank chairman explained that the projections are based on the outlook for austerity measures until the end of the first quarter, adding that if the restrictions were maintained in the second quarter, it would be “a concern”.
This Thursday, the ECB reiterated that the Governing Board remains prepared to adjust all instruments, as appropriate, to ensure that inflation is directed towards the lower inflation target, but close to 2% in a sustained manner.
Attention is now directed to Christine Lagarde’s lecture at 1:30 p.m.
[Atualizada às 12h50]