JAKARTA (TheInsiderStories)- The governing council of European Central Bank (ECB) kept the interest rate on the main refinancing operations and the marginal lending facility and the deposit facility remain unchanged at 0.00 percent, 0.25 percent and -0.50 percent, respectively. It expects the key rates to remain at their present or lower levels until it has seen the inflation outlook robustly converge to a level sufficiently close to 2 percent.
The policymakers also decided to increase the envelope of the pandemic emergency purchase program (PEPP) by Euro500 billion (US$609.75 billion) to a total of EUR1,850 billion. It also extended the horizon for net purchases under the PEPP to at least the end of March 2022.
“In any case, the governing council will conduct net purchases until it judges that the coronavirus crisis phase is over,” said the statement released on Dec. 10.
The governing council also decided to extend the reinvestment of principal payments from maturing securities purchased under the PEPP until at least the end of 2023. In any case, the future roll-off of the PEPP portfolio will be managed to avoid interference with the appropriate monetary policy stance.
Then, ECB announced to further recalibrate the conditions of the third series of targeted longer-term refinancing operations (TLTRO III). It decided to extend the period over which considerably more favorable terms will apply by twelve months, to June 2022. Three additional operations will also be conducted between June and December 2021.
Moreover, the policymakers decided to raise the total amount that counter-parties will be entitled to borrow in TLTRO III operations from 50 percent to 55 percent of their stock of eligible loans. In order to provide an incentive for banks to sustain the current level of bank lending, the recalibrate TLTRO III borrowing conditions will be made available only to banks that achieve a new lending performance target.
In addition, ECB wants to extend to June 2022 the duration of the set of collateral easing measures adopted by the central bank on April 7 and 22, 2020. The extension of these measures will continue to ensure that banks can make full use of the Eurosystem’ liquidity operations, most notably the recalibrate TLTROs. The Bank will reassess the collateral easing measures before June 2022.
The office also decided to offer four additional pandemic emergency longer-term refinancing operations (PELTROs) in 2021, which will continue to provide an effective liquidity backstop. And, net purchases under the asset purchase programme will continue at a monthly pace of EUR20 billion.
ECB continues to expect monthly net asset purchases under the APP to run for as long as necessary to reinforce the accommodative impact of its policy rates, and to end shortly before it starts raising the key ECB interest rates. They also intends to continue reinvesting, the principal payments from maturing securities purchased under the APP for an extended period of time past the date when it starts raising the key rates, as long as necessary to maintain favorable liquidity conditions and an ample degree of monetary accommodation.
Furthermore, 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 board 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.
US$1: EUR0.82
Written by Editorial Staff, Email: theinsiderstories@gmail.com
