The European Central Bank (ECB) decided to maintain monetary policy and at the same time chose to slow the rate of net asset purchases under the pandemic emergency buying program. (PEPP).
The governing council chose to keep the interest rate at 0%, the marginal loan facility at 0.25%and the deposit rate at -0.5%.
The ECB is of the view that this decision was taken based on a joint assessment of the financing situation and the inflation outlook. In conclusion, good financing conditions can be maintained with lower asset purchase rates under PEPP.
The Euro strengthened 0.02% against the US dollar following a decision to trade at around $ 1.1837, while European stocks outpaced previous losses.
The ECB stressed that interest rates will remain at current levels or lower until inflation is seen to reach 2% and stabilize in the medium term.
Eurozone inflation hit its highest level in a decade at 3% in August and European GDP rose 2% in the second quarter, exceeding economists ’expectations.
Policymakers differ on the impact of ongoing inflation. On that basis some analysts argue that there is a probability that the ECB will reduce the stimulus package in December.
The asset purchase program (APP) will continue at a monthly rate of 20 billion euros according to the Governing Council.
