Euro zone Fiscal policy

ECB’s policies to keep “favourable financing conditions”

The ECB led by chair Lagarde is shaping the monetary policies in the euro zone and is influencing the world. Monetary policies in major western economies will be remaining favourable and accommodative, despite the rises of inflation and mid term market based price pressure, which are believed transitory.

The ECB seems to be decisive and determined to keep interest low and will intervene if yields on longer term government bond rises too fast and too high. We will see that these policies made by the ECB will have influence the Fed in the coming week.

  • asset purchase facility (PEPP): the ECB will continue to conduct net asset purchases under the pandemic emergency purchase programme with a total envelope of €1,850 billion until at least the end of March 2022 and, in any case, until it judges that the coronavirus crisis phase is over. Based on a joint assessment of financing conditions and the inflation outlook, the ECB expects purchases over the next quarter to be conducted at a significantly higher pace than during the first months of this year. The bank will continue to reinvest the principal payments from maturing securities purchased under the PEPP until at least the end of 2023.
  • asset purchase facility (APP): net purchases under the asset purchase programme (APP) will continue at a monthly pace of €20 billion. The bank continues to expect monthly net asset purchases under the APP to run for as long as necessary to reinforce the accommodative impact of its policy rates, and to end shortly before it starts raising the key ECB interest rates. The bank also intends to continue reinvesting, in full, the principal payments from maturing securities purchased under the APP for an extended period of time past the date when it starts raising the key ECB interest rates, and in any case for as long as necessary to maintain favourable liquidity conditions and an ample degree of monetary accommodation.
  • interest facility: the interest rate on the main refinancing operations and the interest rates on the marginal lending facility and the deposit facility will remain unchanged at 0.00%, 0.25% and -0.50% respectively. The Governing Council expects the key ECB interest rates to remain at their present or lower levels until it has seen the inflation outlook robustly converge to a level sufficiently close to, but below, 2% within its projection horizon, and such convergence has been consistently reflected in underlying inflation dynamics.
  • liquid facility: the ECB will continue to provide ample liquidity through its refinancing operations. In particular, the third series of targeted longer-term refinancing operations (TLTRO III) remains an attractive source of funding for banks, supporting bank lending to firms and households.


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