ECB expects interest rates to stay at current or lower levels


On September 9, the Governing Council of the European Central Bank took the following decisions:

The interest rate on the main refinancing operations (MRO) and the interest rates on the marginal lending facility and the deposit facility will remain unchanged at zero percent, 0.25 percent and -0.50 percent , respectively.

In support of its symmetrical inflation target of 2% and in line with its monetary policy strategy, the Governing Council expects the ECB’s key rates to remain at their current levels or below until inflation to reach 2% well before the end of its projection horizon and sustainably for the remainder of the projection horizon, and it considers that the progress made in terms of core inflation is sufficiently advanced to be compatible with inflation stabilization at 2% in the medium term. It may also involve a transitional period during which inflation is slightly above target.

Net purchases under the asset purchase program (APP) will continue at a monthly rate of 20 billion euros. The Governing Council continues to expect monthly net asset purchases under the APP to continue for as long as needed to reinforce the accommodative effect of its policy rates, and to end shortly before they quit. ‘he does not start to raise the key rates of the ECB.

The Governing Council also intends to continue to reinvest, in full, the principal of maturing securities purchased under the APP for an extended period after the date on which it begins to raise interest rates. guiding interest of the ECB, and in any event for as long as necessary to maintain favorable liquidity conditions and a large degree of monetary accommodation.

The Governing Council will continue to make net asset purchases under the Pandemic Emergency Purchase Program (PEPP) with a total envelope of € 1,850 billion until the end of March 2022 at least and, in any event, until he judges that the crisis phase of the coronavirus is over.

The Board stands ready to adjust all of its instruments, if necessary, to ensure that inflation stabilizes at its 2% target over the medium term

Based on a joint assessment of financing conditions and inflation outlook, the Governing Council considers that favorable financing conditions can be maintained with a rate of net asset purchases moderately lower than the PEPP compared to two previous quarters.

The Governing Council will buy flexibly based on market conditions and with a view to avoiding a tightening of financing conditions inconsistent with tackling the downward impact of the pandemic on the expected trajectory of inflation. In addition, the flexibility of purchasing over time, between asset classes and between jurisdictions, will continue to promote the smooth transmission of monetary policy.

While favorable financing conditions can be maintained with asset purchase flows that do not exhaust the envelope over the net purchase horizon of the PEPP, it is not necessary to use all of the the envelope. Likewise, the envelope can be recalibrated if necessary to maintain favorable financing conditions to help counter the negative pandemic shock on the trajectory of inflation.

The Board of Governors will continue to reinvest the principal of the maturing securities purchased under the PEPP until at least the end of 2023. In all cases, the future roll-off of the PEPP portfolio will be managed in such a way as to avoid any interference with the appropriate stance of monetary policy. .

The Governing Council will continue to provide abundant liquidity through its refinancing operations. In particular, the third round of targeted longer-term refinancing operations remains an attractive source of funding for banks, supporting bank lending to businesses and households.

The Governing Council stands ready to adjust all of its instruments, if necessary, to ensure that inflation stabilizes at its target of 2% over the medium term.

ECB monetary operations

On September 6, the ECB announced the main seven-day MRO. The transaction was completed on September 7 and attracted bids from eligible eurozone counterparties for € 319 million, up € 303 million from the previous week. The amount has been allocated in full at a fixed rate equivalent to the prevailing MRO rate of zero percent, in accordance with current ECB policy.

On September 8, the ECB completed the seven-day US dollar financing transaction through secured loans in conjunction with the US Federal Reserve. The deal attracted bids of $ 224 million, which were awarded in full at a fixed rate of 0.33 percent.

Domestic treasury bill market

In the national primary treasury bill market, the Treasury issued a tender for 91-day bills and 182-day bills for a settlement value on September 9, due December 9, 2021 and March 10, 2022. , respectively. Offers of 25 million euros were submitted for 91-day bills, with the Treasury accepting all offers, while offers of 15 million euros were submitted for 182-day bills, with the Treasury accepting 10 million. euros. As € 30.50 million in bills matured during the week, the outstanding amount of Treasury bills increased by € 4.50 million to € 778.50 million.

The 91-day bill auction yield was -0.397 percent, down 0.2 basis points from offers of a similar duration issued on September 2, representing a bid price of € 100,1005 for 100 € nominal. The 182-day bill auction yield was -0.369%, up 0.9 basis points from similar duration offers also issued on September 2, representing a bid price of € 100.1869 for 100 € nominal.

During this week there was no listing on the Malta Stock Exchange.

Today, Tuesday, the Treasury will launch a call for tenders for 91-day and 273-day bills due December 16, 2021 and June 16, 2022, respectively.

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