ECB Leaves Rates Unchanged, Announces Liquidity Measures
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(Kitco News) - The European Central Bank left interest rates unchanged Thursday, extended the length of time it expects rates to remain at current levels and announced new refinancing operations, all aimed at maintaining liquidity to boost the economy.
The interest rate on the main refinancing operations and the rates on the marginal lending facility and deposit facility will remain at 0.00%, 0.25% and minus 0.40%, respectively.
“The Governing Council now expects the key ECB interest rates to remain at their present levels at least through the end of 2019, and in any case for as long as necessary to ensure the continued sustained convergence of inflation to levels that are below, but close to, 2% over the medium term,” the ECB statement said.
This is a change in wording, as previously the central bank said it expected rates to remain at current levels only through end of the summer.
Officials also said new quarterly targeted longer-term refinancing operations (TLTRO-III) will be launched in September and continue until March 2021, each with a maturity of two years.
“These new operations will help to preserve favorable bank lending conditions and the smooth transmission of monetary policy,” the ECB said.
Under the program, counterparties can borrow up to 30% of the stock of eligible loans as of Feb. 28 at a rate indexed to the interest rate on the main refinancing operations over the life of each operation. Like the outstanding TLTRO program, TLTRO-III will feature built-in incentives for credit conditions to remain favorable, the ECB said.
“The Eurosystem’s lending operations will continue to be conducted as fixed rate tender procedures with full allotment for as long as necessary, and at least until the end of the reserve maintenance period starting in March 2021,” the ECB said.
Bank officials also said they intend to keep reinvesting principal payments from maturing securities purchased under the asset purchase program for an “extended period of time past the date when it starts raising the key ECB interest rates” or as long as necessary to maintain “favorable liquidity conditions and an ample degree of monetary accommodation.”
ECB President Mario Draghi is scheduled to hold a press conference at 14:30 CET Thursday.