The European Central Bank made no changes to its interest rate policy or to its bond-buying stimulus programs designed to battle the effects of the COVID-19 pandemic in Europe.
The bank’s governing council kept its key interest rate — called the deposit facility rate — unchanged at minus-0.5%.
ECB President Christine Lagarde said on Thursday: “Ample monetary stimulus remains necessary. The [ECB] governing council remains fully committed to doing everything necessary within its mandate to support all citizens of the euro area through these extremely challenging times.”
In June, the ECB had greatly expanded the size of its asset purchase program by €600 billion ($686 billion) to a total of €1.35 trillion ($1.54 trillion).
On Thursday, the bank said it will continue making purchases under this program “until at least the end of June 2021 and, in any case, until it judges that the coronavirus crisis phase is over.”
The size of this program – which the ECB has dubbed the pandemic emergency purchase program, or PEPP – will allow it to buy most of the government debt issued in the euro zone this year.
Last month, the central bank reduced its 2022 inflation forecast to 1.3% from 1.5%, suggesting it does not expect the stimulus measures to boost inflation towards its 2% target.
In addition to PEPP, the central bank already has an existing asset-purchasing program under which it buys about €20 billion ($23 billion) in eurozone bonds every month. On Thursday, the ECB reiterated this latter program will run “as long as necessary.”
The ECB expects the eurozone economy to shrink by 8.7% this year, while the International Monetary Fund predicts a 10.2% contraction.
In late June, ECB President Christine Lagarde said: “We probably have passed the lowest point [of this crisis] and I say that with some trepidation because of course there could be a second wave.”
But ECB Chief Economist Philip Lane warned in a last month that, “weak demand, continued supply constraints and ongoing social distancing restrictions are hampering the normalization of economic activity.”
The post European Central Bank Cautiously Keeps Monetary Policy, Asset Buying Program Unchanged appeared first on International Business Times.