Breaking: ECB leaves key rates and PEPP unchanged, EUR/USD stays near 1.2050

The European Central Bank (ECB) decided to leave the interest rates on the main refinancing operations, 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 ECB's policy announcements and the market reaction. 

The ECB further noted that it will continue to conduct net asset purchases under Pandemic Emergency Purchase Programme (PEPP) with a total envelope of €1,850 billion until at least end of March 2022.

Market reaction

The EUR/USD pair showed no immediate reaction to the ECB's announcements and was last seen gaining 0.18% on a daily basis at 1.2055.

Key takeaways from policy statement as summarized by Reuters

"Since incoming information confirmed the joint assessment of financing conditions and inflation outlook carried out at march monetary policy meeting, ECB expects purchases under PEPP over current quarter to continue to be conducted at a significantly higher pace than during first months of the year."

"Will purchase flexibly according to market conditions and with a view to preventing a tightening of financing conditions that is inconsistent with countering the downward impact of the pandemic on the projected path of inflation."

"In addition, the flexibility of purchases over time, across asset classes and among jurisdictions will continue to support the smooth transmission of monetary policy."

"If favourable financing conditions can be maintained with asset purchase flows that do not exhaust envelope over net purchase horizon of PEPP, envelope need not be used in full."

"Envelope can be recalibrated if required to maintain favourable financing conditions to help counter negative pandemic shock to the path of inflation."

"ECB will continue to reinvest principal payments from maturing securities purchased under PEPP until at least the end of 2023."

"In any case, future roll-off of PEPP portfolio will be managed to avoid interference with the appropriate monetary policy stance."

Net purchases will continue at a monthly pace of €20 billion."

"ECB will continue to provide ample liquidity through its refinancing operations."

"ECB 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."