GOVERNING COUNCIL 29/10 ECB:
Remember events that were seen:
- Fall in oil prices caused fall in inflation.
- Pandemic led to economic crisis and necessary stimulus from ECB to engage economy.
- Inflation in March at 0,7% fell to to 0,4% in April.
- the interest rates on MRO and the interest rates on the marginal lending and deposit facilities will remain unchanged at 0.00%, 0.25%, and -0.50% respectively
- they expect the interest rates to remain unchanged or to be lowered until inflation outlook converges to a level close to 2%.
- It will continue its PEPP (Pandemic Emergency Purchasing Program) - €1,350 billion - until June 2021. Its objetive is to offset the harm the pandemic could have on the path to price stability.
- Continue its Asset Pruchase Programs (QE) investing at a monthly rate of €20 billion, with the additoinal €120 billion temporary envelope. It plans to end these asset purchase program when they begin to raise the key ECB rates.
- Will continue to offer liquidity transactions through refinancing operations, in particular, Targeted long-term refinancing operations (third series - TLTRO III - targeted specifically at banks) for banks. This will support bank lending to firms and households. So far, they had been successful. Reminder that these transactions had a favourable interest rate (50 basis points less)
GOVERNING COUNCIL 10/12 ECB:
In view of the economic fallout from the resurgence of the virus (second drastic wave), The Governing Council recalibrated its monetary policiy:
- Interest rates will be maintained at their respective levels, 0.00% MRO, 0.25% marginal lending facility, and -0.50% Deposit facility.
- They decided to increase the envelope of €1,350 billion by 500 million to €1,850 billion, and extended the horizon to a least March 2022.
- They have decided to extend the period of availability of the TLTRO III for another year - to June 2022. They have also decided to increase the amount they are entitled to borrow by 5% (55% of eligble loans) to sustain bank lending. They will carry out three addtional operations (June, Sept, December)
- Has decided to offer four addtional Pandemic Emergency Long-Term Refinancing Operations (PELTROs) in 2021.
- QE will continue at the same monthly pace of €20 billion every month. It will contue to reinvest the principal amount of maturing securities for an extended amount past the date the ECB raises i.R.