“The interest rate on the main refinancing operations and the marginal lending facility and deposit facility rates will remain unchanged at 0.00%, 0.25% and -0.50%, respectively.” – wrote in a press release.
The European Central Bank said that asset purchases under the Emergency Epidemic Purchase Program (PEPP) will be somewhat slower than before.
“Based on a joint assessment of financing conditions and inflation expectations, the Board believes that favorable financing conditions can be maintained with a moderately low asset purchase rate under the PEPP compared to the past two quarters,” the statement read.
He added, “The board of directors will continue to purchase net assets under the Palestinian Environmental Protection Plan for a total amount of 1,850 billion euros until at least the end of March 2022, and in any case until it sees that the Corona virus crisis is nearing its end.” .
The European Central Bank expects inflation may temporarily exceed the target in a moderate range.
“In support of the 2% identical inflation target and in line with its monetary policy strategy, the Governing Council expects key ECB interest rates to remain at or below the current level until inflation reaches 2% well before the end of the forecast horizon and continues until the end of the horizon. Projection It is estimated that the progress recorded in core inflation is advanced enough to correspond to the stabilization of inflation at the level of 2% over the medium term. It may also indicate a transitional period in which inflation is moderately above the target “- said the statement.
The European Central Bank maintained the flexible nature and reinvested capital payments from maturing bonds under the Environmental Protection Scheme.
“The Board will purchase flexibly in line with market conditions and with a view to avoiding tighter financing terms… In addition, purchasing flexibility over time across asset classes and across jurisdictions will continue to support a smooth monetary policy transition.” statement.
He added, “The Board of Directors will continue to reinvest capital payments since the maturity of PEPP securities until at least the end of 2023. In any case, the PEPP portfolio will be managed in such a way as to avoid interfering with the monetary policy stance.”
The European Central Bank left asset purchases under the APP program unchanged.
“App net purchases will continue at a monthly pace of €20 billion. The Board continues to anticipate that monthly net asset purchases under the app will continue for as long as necessary to enhance the harmonic effect of interest rates, ending shortly before then. The start of the ECB’s key rate hikes – This was stated in the press release.
“The Governing Council also intends to continue to reinvest, in full, the principal amount of outstanding securities purchased under the APP program for an extended period after the date on which the main interest rate of the European Central Bank begins, and in any event for a long period because it is necessary to maintain favorable liquidity and accommodative monetary conditions. Great ”- added.
The European Central Bank also left the lending terms for its Targeted Long-Term Refinancing Operations (TLTRO III) unchanged.
After the decision was announced, the euro rose 0.17 percent. against the dollar to 1.1838. The 10-year bond yield drops 1 basis point to -0.33%.
The next meeting of the European Central Bank will be held on October 28.
“The economic recovery in the eurozone is well advanced,” European Central Bank President Christine Lagarde said at a conference after the ECB meeting.
The economic recovery in the eurozone is well advanced. The eurozone economy will return to pre-pandemic levels at the end of the year. Lagarde said the economy has largely opened up, allowing citizens to consume and businesses to increase production.
Lagarde added that the economy is on track for strong growth in the third quarter.
We expect the European Central Bank to keep interest rates unchanged in the Eurozone. At the same time, the latest macroeconomic forecasts will be presented. We expect inflation and economic growth trajectories to rise over the forecast horizon compared to those presented in June of this year. We believe that a more optimistic assessment of the macroeconomic outlook in the Eurozone will prompt the European Central Bank to limit purchases under its quantitative easing program at its meeting this week. But we do not exclude that such a decision may not be implemented until the October meeting.
– We believe that the European Central Bank will communicate this change in a pessimistic way, explaining that a small reduction in the monthly volume of purchases (decreasing from 80 to 70 billion euros) does not constitute a tightening of monetary policy, but a technical adjustment that allows the continuation of the quantitative easing program on the overall envisaged scale (1850 billion). EUR) in the timeframe announced by the European Central Bank (until March 2022). If the ECB does not reduce the volume of monthly asset purchases in the horizon of several monthly meetings, this will result in the need to increase the overall size of the program or terminate it before March.
– We believe the markets will interpret the gentle drop by the European Central Bank as a hawkish decision, which will help weaken the zloty and increase Polish bond yields.
Patrick Nielsen, director of Mapfre Asset Management, does not anticipate changes in ECB policy.
– The ECB is very pessimistic and I don’t expect many negative surprises after today’s meeting – says Nielsen.
Nielsen adds that his main macro scenario assumes a strong economic recovery and assures that there is still plenty of liquidity ready to enter the market.
Meanwhile, European Central Bank Governing Council member Robert Holzmann said in an interview with Eurofi Magazine that the ECB may normalize its monetary policy faster than markets expect.
“There is a possibility that we may be able to normalize our monetary policy sooner than most financial market experts expect,” Holzman said.
He cited “potential price pressures” caused by supply bottlenecks, labor shortages, pent-up demand, climate change policies and rising inflation, which triggered expectations.
“Our monetary policy measures will remain in place until the crisis is over and inflation reaches our target,” he said. “It may come sooner rather than later if my view on inflation is correct,” he added.
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