As
widely anticipated, the European Central Bank (ECB) left its main refinancing
rate unchanged at 0.00 percent at its December meeting. In addition, its
interest rates on the marginal lending facility and the deposit facility were kept
unchanged at 0.25 percent and -0.50 percent, respectively.
In
its policy statement, the ECB said:
-
its Governing Council judges that the progress on economic recovery and towards
its medium-term 2% inflation goal permits a step-by-step reduction in the pace
of its asset purchases over the coming quarters but monetary accommodation is
still needed;
- the
net asset purchases under the PEPP are expected to be conducted at a slower pace in
1Q2022 than in the previous quarter.
These purchases will end in March 2022;
- the
Governing Council made a decision to extend the reinvestment horizon for the principal
payments from maturing securities purchased under the PEPP until at least the
end of 2024;
- the
PEPP reinvestments can be adjusted flexibly across time, asset classes, and
jurisdictions at any time;
- the
Governing Council decided to strengthen the monthly pace of net purchases under the
APP to EUR40 billion in 2Q2022 and EUR30 billion in 3Q2022. From October 2022
onwards, the net asset purchases under the APP will be maintained at a monthly
pace of EUR20 billion for as long as necessary to reinforce the accommodative
impact of its policy rates. These purchases are to end shortly before the
Governing Council begins increasing the key ECB interest rates;
- the
principal payments from maturing securities purchased under the APP are to be reinvested
for an extended period of time past the date when the Governing Council starts hiking
the key ECB interest rates and, in any case, for as long as necessary to
maintain favourable liquidity conditions and an ample degree of monetary
accommodation;
- the
Governing Council forecasts the key ECB interest rates to remain at their
present or lower levels until it sees inflation reaching 2% well ahead of the
end of its projection horizon and durably for the rest of the projection
horizon, and it judges that realized progress in underlying inflation is
sufficiently advanced to be consistent with inflation stabilizing at 2% over
the medium term.