ECB leaves key rates unchanged as expected, PEPP steady at €1,350 billion


At its monetary policy meeting held on July 16th, 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.

Additionally,  the ECB kept its Pandemic Emergency Purchase Programme (PEPP) steady at €1,350 billion after expanding it by €600 billion in June.

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

Market reaction

The EUR/USD pair edged slightly higher in the last minutes and was last seen trading flat on the day at 1.1409.

Key takeaways from policy statement, per Reuters

"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 will continue its purchases under PEPP with a total envelope of €1,350 billion."

"These purchases contribute to easing the overall monetary policy stance, thereby helping to offset the pandemic-related downward shift in the projected path of inflation."

"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."

"ECB will conduct net asset purchases under PEPP until at least end of June 2021 and, in any case, until it judges that coronavirus crisis phase is over."

"ECB will reinvest principal payments from maturing securities purchased under PEPP until at least end of 2022."

"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, together with purchases under an additional €120 billion temporary envelope until end of the year."

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

"In particular, the latest operation in the third series of TLTRO (TLTRO III) has registered a very high take-up of funds, supporting bank lending to firms and households."

"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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