ECB leaves its key interest rates unchanged in July; expects rates to remain at their present or lower levels until it sees inflation reaching 2% well ahead of the end of its projection horizon

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 kept unchanged at 0.25 percent and -0.50 percent, respectively.

In its policy statement, the ECB said:

In support of its symmetric 2%-inflation target and in line with its monetary policy strategy, Governing Council expects key ECB’s interest rates to remain at their present or lower levels until it sees inflation reaching 2% well ahead of the end of its projection horizon and durably for the rest of projection horizon, and it judges that realized progress in underlying inflation is sufficiently advanced to be consistent with inflation stabilizing at 2% over the medium term. This may also imply a transitory period in which inflation is moderately above target;

Governing Council will continue to conduct net asset purchases under pandemic emergency purchase programme (PEPP) with a total envelope of €1,850 billion until at least the end of March 2022 and, in any case, until it judges that the coronavirus crisis phase is over

Governing Council continues to expect purchases under PEPP over current quarter to be conducted at significantly higher pace than during the first months of the year;

Net purchases under asset purchase programme (APP) will continue at monthly pace of €20 billion. Governing Council 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 key ECB interest rates;

Governing Council will continue to reinvest principal payments from maturing securities purchased under PEPP until at least the end of 2023. In any case, future roll-off of PEPP portfolio will be managed to avoid interference with appropriate monetary policy stance;

Governing Council will continue to provide ample liquidity through its refinancing operations (TLTRO III);

Governing Council stands ready to adjust all of its instruments, as appropriate, to ensure that inflation stabilises at its two per cent target over the medium term