Breaking: ECB leaves key rates unchanged, expands PEPP by €600 billion


At its monetary policy meeting held on June 4th, 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. 

More importantly, the ECB announced that it expanded its Pandemic Emergency Purchase Programme (PEPP) by €600 billion to €1,350 billion.

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

Market reaction

With the initial market reaction, the EUR/USD pair gained nearly 50 pips in a matter of minutes and was last seen trading at 1.1250, up 0.15% on the day.

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ECB Quick Analysis: Frankfurt's firepower joins Berlin's boost, EUR/USD higher levels to watch.

One-two punch – in favor of the euro. Less than 24 hours have passed since German Chancellor Angela Merkel announced a €130 billion stimulus plan, and in Frankfurt, on the other side of Europe's largest economy, another stimulus boost came.

ECB expands economic support for the eurozone.

Central bank increases the Pandemic Emergency Purchase Program by €600 billion. Bond program proceeds to reinvested until at least the end of 2022.

Key takeaways from the policy statement

"In response to pandemic-related downward revision to inflation over projection horizon, PEPP expansion will further ease general monetary policy stance, supporting funding conditions in real economy, especially for businesses and households."

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

"This allows ECB to effectively stave off risks to smooth transmission of monetary policy."

"Horizon for net purchases under PEPP will be extended to at least end of June 2021."

"In any case, ECB will conduct net asset purchases under PEPP until it judges that coronavirus crisis phase is over."

"Maturing principal payments from securities purchased under PEPP will be reinvested until at least end of 2022."

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

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

"ECB continues to expect monthly net asset purchases under APP to run for as long as necessary to reinforce accommodative impact of its policy rates, and to end shortly before it starts raising interest rates."

"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 continues to stand 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."

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