ECB Keeps Policy Unchanged

The European Central Bank kept its interest rate on the main refinancing operations and the interest rates on the marginal lending facility and the deposit facility unchanged at 0.00%, 0.25% and -0.40% respectively.

The ECB also expects the rates to remain at current levels for some time past the horizon of the net asset purchases. The policy makers indicated their inclination to make net asset purchases under the asset purchase programme (APP) with €30 billion a month, starting in January and continuing until at least the end of September. The program may persist beyond the aforementioned time period if necessary and, in any case until the Governing Council sees a sustained adjustment in the path of inflation consistent with its inflation aim.

The ECB noted in its press release, “If the outlook becomes less favorable, or if financial conditions become inconsistent with further progress towards a sustained adjustment in the path of inflation, the Governing Council stands ready to increase the APP in terms of size and/or duration.”

This will result in the reinvestment of principal payments from maturing securities purchased under the APP for extended period of time. The action is expected to aid liquidity conditions and contribute to an appropriate monetary policy stance.