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ECB keeps its guideline rates unchanged

The European Central Bank (ECB) kept its interest rates unchanged at its historic low, as well as the exceptional support device for the economy as a whole, it was reported on Thursday at the end of the meeting of the Council of Governors.

The time has not yet come to end the expansionary monetary policy, defended the president of the ECB, Christine Lagarde, after the meeting.

The debate on the progressive end of the massive debt purchase program, promoted last year after the start of the pandemic, is “premature” and was not addressed at the third meeting of governors in 2021, said the president.

The ECB Council decided to keep the main interest rate at zero, while banks will apply 0.50% to their deposits with the central bank instead of using them for loans to their clients.

The institute will also continue with its purchase of debt at an accelerated pace, within the framework of a program against the pandemic (PEPP), launched a year ago to maintain favorable financing conditions, and which must still cover 1.85 trillion euros ($ 2.230 trillion) to spend between now and March 2022.

As indicated, the guideline rate used for short-term bank refinancing remained at zero, at the same level since 2016.

Decided last March in response to pressure on bond interest rates, the “significant” increase in the rate of purchase of public and private debt is expected to continue.

“The board of governors expects that purchases under the PEPP will continue during the current quarter at a significantly higher rate than during the first months of the year,” the agency said.

This intervention had helped to make the bond market more flexible after the nervousness caused at the beginning of the year due to fears of a growth in the US economy.

Since March, the weekly amount of net asset purchases under the PEPP has averaged about 17 billion euros, compared to 12 billion euros in January and February.

– Third wave –

The ECB considers that the economic outlook “is darkened by uncertainty” due to the pandemic and, specifically, the third wave of covid-19 that haunts the Old Continent.

“The persistence of high levels of infection and containment measures continue to affect economic activity in the short term,” Lagarde said.

The institute, which will reveal new forecasts until 2023 at its next meeting in June, continues to bet on “a firm reactivation of activity” this year thanks to vaccination campaigns.

The ECB’s priority is to guarantee favorable credit conditions for families and companies.

For this reason, it kept interest rates at the lowest levels in the history of the single currency.

Before raising rates and abandoning expansionary monetary policy, the ECB wants to ensure inflation levels close to 2%, an objective that the euro area has not reached since 2012.

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