ECB leaves its key interest rates unchanged in September; judges that favourable financing conditions can be maintained with a moderately lower pace of PEPP purchases

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:

• Governing Council expects key ECB interest rates to remain at their present or lower levels until it sees inflation reaching 2 percent well ahead of the end of its projection horizon and durably for rest of projection horizon;
  
• Net purchases under asset purchase programme (APP) will continue at a monthly pace of EUR20 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 conduct net asset purchases under the pandemic emergency purchase programme (PEPP) with a total envelope of EUR1,850 billion until at least the end of March 2022;
• Based on joint assessment of financing conditions and the inflation outlook, Governing Council judges that favourable financing conditions can be maintained with a moderately lower pace of net asset purchases under PEPP than in the previous two quarters;
• Governing Council will purchase flexibly according to market conditions and with view to preventing tightening of financing conditions that is inconsistent with countering downward impact of the pandemic on projected path of inflation;
• Envelope can be recalibrated if required to maintain favourable financing conditions to help counter negative pandemic shock to path of inflation;
• Governing Council will continue to provide ample liquidity through its refinancing operations (TLTROs);
• Governing Council stands ready to adjust all of its instruments, as appropriate, to ensure that inflation stabilises at its 2 percent target over medium term