European Central Bank announces slowdown in bond purchases amid pandemic

European Central Bank announces slowdown in bond purchases amid pandemic

Christine Lagarde (right), President of the European Central Bank (ECB) and Vice-President Luis de Guindos (left)

Thomas Lohness | Getty Images News | Getty Images

The European Central Bank kept monetary policy unchanged on Thursday, but chose to slow the pace of net asset purchases as part of its emergency pandemic purchasing program.

The Governing Council voted to maintain the interest rate on the ECB’s basic refinancing operations at 0%, on the marginal credit facility at 0.25% and on the deposit facility at -0.5% .

The ECB said: “Based on a combined assessment of the financing situation and the inflation outlook, the Governing Council has decided to maintain a favorable financial situation with a slightly lower rate of net asset purchases. at the PEPP compared to the two previous quarters. Can be placed. ”In a report.

Markets were eagerly awaiting the latest policy decision from the Frankfurt Institute for signs of an impending easing of pandemic-era stimulus measures amid rising inflation and strong economic growth.

Eurozone inflation peaked at 3% in August and the GDP of the 19 members of the common currency bloc climbed 2% in the second quarter, beating economists’ expectations.

The central bank’s emergency pandemic supply program was implemented in March 2020 to support the euro area economy during the COVID-19 crisis, and is expected to expire in March 2022 for a value potential total of 1.85 trillion euros ($ 2.19 trillion). Go do.

ECB policymakers have expressed the opposite of the threat of persistent inflation rather than “temporary” as has been the consensus among central banks around the world.

After some analysts suggested the ECB would announce a cut to its Covid-induced stimulus package in December, the US Federal Reserve indicated that it would likely start declining by the end of the year.

ECB Chief Economist Philip Lane said in a recent interview that “September is a long way off” from the planned PEPP closing date, suggesting that a thin announcement could be months away.

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