European Central Bank Leaves Policy Settings As Is

July 16, 2020

The European Central Bank’s Governing Council agreed to continue with currently expansive monetary policy settings. According to a released statement, the refinancing rate is zero percent since its last cut of 5 bps in late 2015 and is flanked by a negative 0.50% deposit rate (last cut by 10 bps in September 2019) and a 0.25% marginal lending facility rate since March 2016. A EUR 1.35 trillion pandemic emergency purchase program will be maintained until the pandemic crisis ends and in any case not before mid-2021, and the regular asset purchase program at EUR 20 billion monthly will persist until shortly before interest rates begin to rise. That watershed in turn isn’t plannedĀ  “until the Council has seen the inflation outlook robustly converge to a level sufficiently close to, but below, 2% within its projection horizon, and such convergence has been consistently reflected in underlying inflation dynamics.” TLTRO III operations will be ongoing, and “The Governing Council continues to stand ready to adjust all of its instruments, as appropriate, to ensure that inflation moves towards its aim in a sustained manner, in line with its commitment to symmetry.”

Copyright 2020, Larry Greenberg. All rights reserved. No secondary distribution without express permission.

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