The European Central Bank (ECB) decided to leave the interest rates on the main refinancing operations, the marginal lending facility and the deposit facility unchanged at 0.00%, 0.25% and -0.50%, respectively, as expected.

Follow our live coverage of the ECB’s policy announcements and the market reaction. 

Market reaction

The initial market reaction to the ECB’s policy announcements is largely muted and the EUR/USD pair was last seen trading flat on the day at 1.1793.

Key takeaways from policy statement as summarized by Reuters

“ECB agreed on a symmetric inflation target of 2% over the medium term.”

“Interest rates have been close to their lower bound for some time and medium-term outlook for inflation is still well below ECB’s target.”

“In these conditions, ECB today revised its forward guidance on interest rates.”

“It did so to underline its commitment to maintaining a persistently accommodative monetary policy stance to meet its inflation target.”

“This may also imply a transitory period in which inflation is moderately above target.”

“ECB continues to expect purchases under Pandemic Emergency Purchase Programme (PEPP) over current quarter to be conducted at a significantly higher pace than during first months of the year.”

“ECB also confirmed its other measures to support its price stability mandate, namely level of interest rates, its purchases under APP, its reinvestment policies and its TLTRO.”

“Interest rate on main refinancing operations and interest rates on the marginal lending facility and the deposit facility will remain unchanged at 0.00%, 0.25% and -0.50% respectively.”

“APP net purchases will continue at a monthly pace of €20 billion.”

“ECB 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 interest rates.”

“ECB also intends to continue reinvesting, in full, principal payments from maturing securities purchased under APP for an extended period of time past date when it starts raising interest rates, and in any case for as long as necessary to maintain favourable liquidity conditions and an ample degree of monetary accommodation.”

“ECB will continue to conduct net asset purchases under PEPP with a total envelope of €1,850 billion until at least end of march 2022 and, in any case, until it judges that coronavirus crisis phase is over.”

“As incoming information confirmed the joint assessment of financing conditions and inflation outlook carried out at June monetary policy meeting, ECB continues to expect purchases under PEPP over current quarter to be conducted at a significantly higher pace than during first months of the year.”

“ECB will purchase flexibly according to market conditions and with a view to preventing a tightening of financing conditions that is inconsistent with countering the downward impact of the pandemic on the projected path of inflation.”

“In addition, the flexibility of purchases over time, across asset classes and among jurisdictions will continue to support the smooth transmission of monetary policy.”

“If favourable financing conditions can be maintained with asset purchase flows that do not exhaust envelope over net purchase horizon of PEPP, envelope need not be used in full.”

“Equally, the envelope can be recalibrated if required to maintain favourable financing conditions to help counter negative pandemic shock to the path of inflation.”

“ECB will continue to reinvest principal payments from maturing securities purchased under PEPP until at least end of 2023.”

“In any case, future roll-off of PEPP portfolio will be managed to avoid interference with the appropriate monetary policy stance.”

“ECB will continue to provide ample liquidity through its refinancing operations.”

“ECB stands ready to adjust all of its instruments, as appropriate, to ensure that inflation stabilises at its 2% target over the medium term.”