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  • ECB leaves its key interest rates unchanged in December; decides to extend PEPP reinvestment horizon
Ekonomické zprávy
16.12.2021

ECB leaves its key interest rates unchanged in December; decides to extend PEPP reinvestment horizon

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.

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