ECB Leaves Interest Rates Unchanged, But Adjustment in Bond Purchases

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The European Central Bank (ECB) has left key interest rates as expected at a level of 0 to 0.25 percent. Banks continue to pay 0.5 percent interest on the money they store at the ECB. However, the bond buying program is being scaled back slightly.

 

Markets are particularly looking forward to the statement from ECB president Christine Lagarde later on Thursday.

Several ECB executives think it is high time the central bank phased out its monetary support policy as global supply problems drive up prices for all kinds of goods. As a result, the central bank will moderate its asset purchase program slightly in the course of the year. Currently, 80 billion euros worth of bonds is bought up every month through the so-called PEPP (Pandemic Emergency Purchase Programme). However, this amount is reduced in the course of the year.

It is not yet clear when and how the ECB will further reduce its PEPP. The program with a maximum amount of $1850 billion will run at least through March next year, but possibly longer. After that, the ECB will continue with the support measure “as long as the crisis phase of the corona pandemic lasts”.

It is also unknown to what extent the central bank will strengthen the modest standard asset purchase program (APP) and make it more flexible. Currently, this program is worth 20 billion euros per month. These decisions are controversial, according to experts. A decision on this is not expected before the December policy meeting.

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