Breaking: ECB leaves key rates unchanged, EUR/USD holds steady above 1.1800


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.

Market reaction

The initial market reaction, so far, has been muted and the EUR/USD pair was last seen trading with modest gains around the 1.1830 region. 

Key takeaways from the accompanying policy statement:

  • ECB judges that favourable financing conditions can be maintained with a moderately lower pace of PEPP purchases.
  • APP purchases to continue at a monthly pace of €20 billion.
  • PEPP envelope stays at €1.85 trillion and will run at least through end of March 2022.
  • Ready to adjust all tools to stabilize inflation at 2%.
  • Inflation may moderately exceed goal for transitory period.
  • PEPP to prevent undue tightening of financing conditions.
  • PEPP flexible regarding time, asset classes, countries.
  • Do not fave to use full PEPP envelope, can also increase.
  • Future roll-off of PEPP bonds won’t harm policy stance.
  • ECB to re-invest maturing PEPP bonds at least through end-2023.
  • To reinvest QE debt for extended time after first rate hike.

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