ECB leaves interest rates at current record lows, decides to buy bonds at moderately lower pace
The European Central Bank kept its monetary policy unchanged on Thursday but opted to slow down the pace of net asset purchases under its pandemic emergency purchase program.
The Governing Council voted to maintain the interest rate on the ECB’s main refinancing operations at 0%, on the marginal lending facility at 0.25% and on the deposit facility at -0.5%.
The ECB also decided to buy bonds at a moderately lower pace in the next three months.
It stressed however that the move wasn't a "tapering", saying that the size of the net asset purchases under its Pandemic Emergency Purchase Programme was unchanged.
The ECB explained it was reducing the pace, not lowering the total amount of support which is set at 1.8-5 trillion euros, or about 2.2 trillion U.S. dollars.
With the latest decision, this now means that it will be buying less than 80 billion euros, or about 95 billion U.S. dollars, of bonds per month, the initial amount it had been purchasing.
The European Central Bank also revised up its growth and inflation forecasts for this year as the euro zone economy recovers faster than expected from the pandemic.
It raised the growth forecast for this year to 5 percent and revised up the inflation outlook for 2021 to 2.2 percent high above the 1.9 percent projected in June.
Markets had been eagerly awaiting the Frankfurt institution’s latest policy decision for signs of an imminent unwinding of pandemic-era stimulus, amid surging inflation and strong economic growth.
The euro gained 0.2% against the dollar following the decision to trade at around $1.1837, while European stocks pared earlier losses.
The ECB reiterated that interest rates will remain at their present or lower levels until inflation is seen reaching 2% “well ahead of the end of its projection horizon and durably for the rest of the projection horizon,” and until the ECB judges that inflation will stabilize at 2% over the medium term.
Reference: CNBC, Arirang
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