ECB Governing Council, Euro Talking Points
- ECB main interest rate remained unchanged – as expected
- Today marks the first interest rate meeting of the Governing Council in 2022
- Record high inflation (5.1% for January) tests the ECB’s ‘lower inflation’ forecasts
- Slowing economic growth may be referenced in support of continued stimulus
ECB Main Refinancing Rate 0%, Deposit Facility -0.5%, Lending Facility 0.25%
Customize and filter live economic data via our DaliyFX economic calendar
The statement on monetary policy decisions today essentially echoed the December stance of continued flexibility in net asset purchases which it says has helped “counter the impaired transmission of monetary policy and made the Governing Councils efforts to achieve its goal more effective”.
PEPP and APP Purchases
The ECB announced that it will stop PEPP purchases in March this year as planned but will continue to make purchases related to its APP program, increasing Q2 purchases to 40 billion Euros but decreasing the amount to 30 billion in Q3. “The pandemic has shown that, under stressed conditions, flexibility in the design and conduct of asset purchases has helped to counter the impaired transmission of monetary policy and made the Governing Council’s efforts to achieve its goal more effective” – ECB Monetary Policy Statement
The statement continued, “The Governing Council intends to reinvest the principal payments from maturing securities purchased under the PEPP until at least the end of 2024” and mentioned that reinvestment of APP principal payments will continue for an extended period of time after the day it starts raising interest rates.
Markets largely expected rates to remain on hold and therefore there has been little volatility in EUR/USD shortly after the announcement.
Source: IG, prepared by Richard Snow
Considering the BoE rate hike moments earlier, it’s no surprise that EUR/GBP trades slightly lower after the release.
EUR/GBP 5 Min Chart
Source: IG, prepared by Richard Snow
--- Written by Richard Snow for DailyFX.com
Contact and follow Richard on Twitter: @RichardSnowFX
