22.07.202122:57 Forex Analysis & Reviews: What did the ECB say on July 22?

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What has the ECB decided?

Key ECB interest rates

The interest rate on the main refinancing operations and the interest rates on the margin credit line and deposit line will remain unchanged at 0.00%, 0.25% and -0.50%, respectively.

In support of its symmetrical two percent inflation target and in line with its monetary policy strategy, the Governing Council expects the European Central Bank's key interest rates to remain at the current or lower level until inflation reaches two percent well before the end of this year. Its forecast horizon and the long term for the remainder of the forecast horizon, and he believes that the progress made in core inflation is sufficiently advanced to correspond to the stabilization of inflation at the level of two percent in the medium term. It can also mean a transition period during which inflation is moderately above the target.

The Asset Purchase Program (APP)

Net purchases within the APP will continue at the level of 20 billion euros per month. The Governing Council still expects that the monthly purchase of net assets under the APP will continue for as long as necessary to strengthen the regulatory impact of its interest rates, and will end shortly before it starts raising key ECB interest rates.

The Governing Council also intends to continue to reinvest in full the principal payments on securities with an upcoming maturity acquired under the APP for an extended period of time after the date when it begins to raise the key interest rates of the ECB, and in any case for as long as necessary. maintain favorable liquidity conditions and a sufficient degree of monetary adaptation.

The Pandemic Procurement Program (PEPP)

The Governing Council will continue to purchase net assets under PEPP worth 1,850 billion euros until at least the end of March 2022 and, in any case, until it decides that the phase of the coronavirus crisis is over.

Since the incoming information confirmed the joint assessment of the financing conditions and the inflation forecast conducted at the June monetary policy meeting, the Governing Council still expects that purchases under PEPP will be carried out at a significantly higher pace in the current quarter than during the first month of the year.

The Governing Council will conduct purchases flexibly in accordance with market conditions and in order to prevent tightening of financing conditions that are incompatible with countering the downward impact of the pandemic on the projected inflation trajectory. In addition, the flexibility of purchases over time for different asset classes and between jurisdictions will continue to support a smooth transfer of monetary policy. If favorable financing conditions can be maintained with asset purchase flows that do not exhaust the cover beyond the net purchase horizon of PEPP, the cover does not need to be used in full. Similarly, the envelope can be recalibrated if necessary to maintain favorable financing conditions to help counter a negative pandemic shock on the inflation trajectory.

The Board of Governors will continue to reinvest the principal payments on securities with an upcoming maturity acquired under the PEPP program until at least the end of 2023. In any case, further reduction of the PEPP portfolio will be managed in order to avoid interference with the corresponding monetary policy position.

Refinancing operations

The Managing Board will continue to provide sufficient liquidity through refinancing operations. In particular, the third series of targeted long-term refinancing operations (LTRO III) remains an attractive source of financing for banks, supporting bank lending to firms and households.