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.
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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