Sunday, August 1

The ECB insists on low rates despite the change in strategy


Christine Lagarde, president of the Central European Bank (ECB).

Christine Lagarde, president of the Central European Bank (ECB).

There have been no surprises in Frankfurt. The governing council of Banco Central European (ECB) continues with its accommodative policy by keeping official reference interest rates at their historical minimum levels in those that have been installed since March 2016, as well as the debt programs, which will also remain unchanged.

This July meeting of this year was certainly expected by investors as it was the first since the entity decided to revise its inflation target and place it at 2% in the medium term, instead of the traditional level “below, although close to” 2 %, and in the words of the president of the central bank, Christine Lagarde, a few days ago in an interview with Bloomberg in which she assured that there would be “interesting changes” in indications about the stance of monetary policy.

But nothing further. After its meeting this Thursday, the governing council has assured that it “expects the key interest rates of the ECB to remain at their current levels or lower until it sees inflation reach 2% (…) and lasting form “. Currently, inflation in the euro zone is at 1.9%, after being at 2% in May.

Thus, the ECB leaves the official price of money installed at 0%, while the marginal credit facility (the money that banks pay to the ECB for lending them money) remains at 0.25% and the deposit facility (the money that the ECB gives to banks to keep their money) it remains at 0.50%, that is, the ECB charges the banks instead of paying them.

Nor have there been any changes to their purchasing programs. The pandemic emergency purchase program (PEPP), created in March last year and expanded in June and December, will maintain its total allocation of 1.85 billion euros and will remain in force “at least until the end of March of 2022 and, in any case, until it considers the crisis phase of the coronavirus“.

For its part, the asset purchase program (APP), launched long before the arrival of the coronavirus, will also continue at a monthly rate of 20,000 million euros. “The governing council continues to expect that the monthly purchases of net assets under the APP will continue for as long as necessary to reinforce the accommodative impact of its official interest rates and will end shortly before the interest rates begin to rise. key interest of the ECB “, indicates the bank.

Waiting for Lagarde

After maintaining its invariable accommodative policy, it is now the turn of the president of the organization, Christine Lagarde, faced with presenting the new forecasts at the press conference after the meeting of the governing council. This is one of the key parts of monetary policy, known as ‘forward guidance’, which Draghi began to use at the ECB in 2013, and which is nothing more than issuing messages in order to influence expectations agents (companies and individuals) and financial conditions.


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