The Governing Council of the European Central Bank announced today that it would stick to its very accommodative monetary policy stance, as they continue to assess whether the €500 billion stimulus package announced last month is sufficient in their bid to support a recovery in a Eurozone economy ravaged by another set of lockdowns.
First, the interest rate on the main refinancing operations and the interest rates on the marginal lending facility and the deposit facility will remain unchanged at 0.00 per cent, 0.25 per cent and -0.50 per cent respectively.
The Governing Council expects the key ECB interest rates to remain at their present or lower levels until it has seen the inflation outlook converges to a level within 2 per cent of its projection.
The governing council also confirmed that they will continue with the ‘pandemic emergency purchase programme’ (PEPP), announced back in March 2020 with the aim of stimulating the economy and supporting the liquidity of all financial sectors. The program will continue with temporary purchasing of assets in the form of public and private sector securities to the tune of €1,850 billion. This figure is unchanged from the budget extension announced on the 10th of December.
Florian Hense, an economist at Berenberg, said earlier on Thursday that the ECB was ‘in wait-and-see mode’ while it was ‘still taking stock’ of the impact of the latest stimulus measures.
Widely watched data indicators suggest that the coronavirus restrictions across the Europe have significantly slowed economic activity in the first 20 days of the year, with some economists expecting that the 19-country block will fall into a double-dip recession this winter.
In light of this, the Governing Council continues to stand ready to adjust all of its instruments, as appropriate, to ensure that inflation moves towards its aim in a sustained manner.