ECB Maintains Rates and Expands Stimulus

The European Central Bank (ECB) has decided on Thursday to maintain interest rates unchanged, expecting its rates to remain at their present or lower levels until it has seen the inflation outlook robustly converge to a level sufficiently close to, but below, its 2% target.

Moreover, the ECB board decided to increase the envelope of the Coronavirus pandemic emergency purchase programme (PEPP) by EUR 500 billion to a total of EUR 1.85 trillion.

The ECB has also extended the horizon for net purchases under the PEPP to at least the end of March 2022.

The ECB also decided to extend the reinvestment of principal payments from maturing securities purchased under the PEPP until at least the end of 2023.

Furthermore, the ECB decided to further recalibrate the conditions of the third series of targeted longer-term refinancing operations (TLTRO III), and to extend to June 2022 the duration of the set of collateral easing measures.

The ECB is also set to offer four additional pandemic emergency longer-term refinancing operations (PELTROs) in 2021, which will continue to provide an effective liquidity backstop.

Net purchases under the asset purchase programme (APP) will continue at a monthly pace of EUR 20 billion, while the Eurosystem repo facility for central banks (EUREP) and all temporary swap and repo lines with non-euro area central banks will be extended until March 2022.

Finally, the Governing Council decided to continue conducting its regular lending operations as fixed rate tender procedures with full allotment at the prevailing conditions for as long as necessary.