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ECB Leaves Rates Unchanged, Extends Expected Length Of Accommodation

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(Kitco News) - The European Central Bank left interest rates unchanged Thursday and extended the length of time that officials expect them to remain at current levels.

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 first half of 2020, 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 said.

At their last meeting, council members had said they expected rates to remain at current low levels for a shorter period of time – at least through the end of 2019.

With a global trade war heating up, the central bank was expected to remain dovish in a bid to boost the European economy. Other worries include Italy being in conflict with the European Commission on debt issues and weak data from Germany industry. In particular, Reuters reported, the ECB was expected to offer to offer to pay banks if they borrow cash from the central bank and pass it on to households and firms.

Officials once again said the Governing Council intends to continue 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 interest rates in order to maintain favorable liquidity conditions and ample monetary accommodation.

“Regarding the modalities of the new series of quarterly targeted longer-term refinancing operations (TLTRO III), the Governing Council decided that the interest rate in each operation will be set at a level that is 10 basis points above the average rate applied in the Eurosystem’s main refinancing operations over the life of the respective TLTRO,” the ECB said. “For banks whose eligible net lending exceeds a benchmark, the rate applied in TLTRO III will be lower and can be as low as the average interest rate on the deposit facility prevailing over the life of the operation plus 10 basis points.”

ECB President Mario Draghi is scheduled to hold a press conference at 14:30 CET, or 8:30 a.m. EDT.

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