Breaking: ECB leaves interest rates unchanged, eases TLTRO conditions

At its monetary policy meeting held on April 30th, the Governing Council of the European Central Bank (ECB) decided to leave the interest rates 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 -0.50%, respectively, as expected. 

Follow our live coverage of the market reaction to the ECB's policy announcements. 

ECB press conference: Lagarde speech live stream – April 30.

Christine Lagarde, President of the European Central Bank (ECB), is scheduled to deliver her remarks on the monetary policy outlook in a press conference at 12:30 GMT.

ECB Quick Analysis: Where is Lagarde's largesse? Failure to add QE may send EUR/USD tumbling.

Key takeaways

"Conditions on TLTRO (TLTRO III) have been further eased."

"Specifically, ECB decided to reduce the interest rate on TLTRO III operations during the period from June 2020 to June 2021 to 50 basis points below average interest rate on Eurosystem’s main refinancing operations prevailing over the same period."

"Moreover, for counterparties whose eligible net lending reaches lending performance threshold, interest rate over the period from June 2020 to June 2021 will now be 50 basis points below average deposit facility rate prevailing over the same period."

"A new series of non-targeted pandemic emergency LTRO will be conducted to support liquidity conditions in euro area financial system and contribute to preserving smooth functioning of money markets by providing an effective liquidity backstop."

"Since the end of March, purchases have been conducted under ECB's new pandemic emergency purchase programme (PEPP), which has an overall envelope of €750 billion, to ease overall monetary policy stance and to counter severe risks to monetary policy transmission mechanism and outlook for euro area posed by coronavirus pandemic."

"These purchases will continue to be conducted in a flexible manner over time, across asset classes and among jurisdictions."

"ECB will conduct net asset purchases under PEPP until it judges that coronavirus crisis phase is over, but in any case until end of this year."

"Net purchases will continue at a monthly pace of €20 billion, together with purchases under additional €120 billion temporary envelope until end of year."

"Reinvestments of principal payments from maturing securities purchased under APP will continue, in full, for an extended period of time past date when ECB starts raising interest rates, and in any case for as long as necessary to maintain favourable liquidity conditions and an ample degree of monetary accommodation."

"ECB expects interest rates to remain at their present or lower levels until it has seen inflation outlook robustly converge to a level sufficiently close to, but below, 2% within its projection horizon, and such convergence has been consistently reflected in underlying inflation dynamics."

"ECB is fully prepared to increase size of PEPP and adjust its composition, by as much as necessary and for as long as needed."

"In any case, it stands ready to adjust all of its instruments, as appropriate, to ensure that inflation moves towards its aim in a sustained manner, in line with its commitment to symmetry."

Market reaction

With the initial reaction, the EUR/USD pair dropped toward 1.0860 but quickly erased its losses. As of writing, the pair was up 0.07% on the day at 1.0880.