ECB leaves its main refinancing rate at 0.00%, increases PEPP by EUR500 bln

The European Central Bank (ECB) left its main refinancing rate unchanged at 0.00 percent on Thursday, as widely expected. Its interest rates on the marginal lending facility and the deposit facility were also left unchanged at 0.25 percent and -0.50 percent, respectively.

In its policy statement, the ECB said:

• Governing Council expects key ECB interest rates to remain at their present or lower levels until it has seen inflation outlook robustly converge to level sufficiently close to, but below, 2 percent;
• Governing Council decided to increase envelope of its pandemic emergency purchase programme (PEPP) by EUR500 billion to a total of EUR1,850 billion; extended the horizon for net purchases under the PEPP to at least the end of March 2022;
• Governing Council also decided to extend reinvestment of principal payments from maturing securities purchased under the PEPP until at least the end of 2023;
• Governing Council decided to further recalibrate conditions of third series of targeted longer-term refinancing operations (TLTRO III); decided to raise total amount that counterparties will be entitled to borrow in TLTRO III operations from 50 percent to 55 percent of their stock of eligible loans;
• Governing Council decided to extend to June 2022 duration of the set of collateral easing measures adopted by Governing Council on 7 and 22 April 2020;
• Governing Council also decided to offer four additional pandemic emergency longer-term refinancing operations (PELTROs) in 2021, which will continue to provide effective liquidity backstop;
• Net purchases under asset purchase programme (APP) will continue at monthly pace of EUR20 billion;
• Governing Council also intends to continue reinvesting, in full, principal payments from maturing securities purchased under APP for extended period of time past date when it starts raising key ECB interest rates;
• Eurosystem repo facility for central banks (EUREP) and all temporary swap and repo lines with non-euro area central banks will be extended until March 2022;
• Governing Council decided to continue conducting its regular lending operations as fixed rate tender procedures with full allotment at the prevailing conditions for as long as necessary;
• Uncertainty remains high, including with regard to dynamics of the pandemic and the timing of vaccine roll-outs;
• We will continue to monitor developments in exchange rate with regard to their possible implications for medium-term inflation outlook;
• Governing Council, therefore, continues to stand ready to adjust all of its instruments, as appropriate, to ensure that inflation moves towards its aim in sustained manner, in line with its commitment to symmetry.