The following is the statement of the European Central Bank after its policy meeting.
The Governing council confirmed the decisions made at its monetary policy meeting in December last year.
The Governing Council conducted net asset purchases under the Pandemic Emergency Purchase Programme (PEPP) in the first quarter 2022 at a slower pace than the previous quarter.
It will stop buying net assets under the PEPP after March 2022.
The Governing Council plans to reinvest principal payments from mature securities bought under the PEPP up until the end of 2024.
The future roll-offs of the PEPP portfolio are managed so as to not interfere with the appropriate monetary policy position.
The pandemic demonstrated that under stress conditions, flexibility in asset purchase design and execution has helped to prevent the impairment of monetary policy transmission and has made the efforts of the Governing council to achieve their goal more efficient.
Under stressed conditions, the Governing council’s mandate will ensure that flexibility is an integral part of monetary policies whenever threats to monetary transmission threaten the attainment price stability.
Particularly, PEPP reinvestments are flexible across time, asset classes, and jurisdictions in the event that there is renewed market fragmentation due to the pandemic.
This could be done by purchasing bonds issued in the Hellenic Republic instead of rollingover redemptions. This would avoid an interruption in purchases in the jurisdiction and could hinder the transmission of monetary policies to the Greek economy, which is still recovering from the effects of the pandemic.
To counter any negative shocks resulting from the pandemic, net purchases under the PEPP may be reopened if necessary.
Asset purchase program (APP) Monthly net purchases under the APP are set to reach EUR40 billion in second quarter 2022, and EUR30 billion third quarter 2022. This is in line with the gradual reduction of asset purchases that was decided upon in December 2021.
The Governing Council will continue to purchase net assets under the APP at a monthly rate of EUR20 billion from October. This is in order to strengthen the accommodative effect of its policy rates.
The Governing council expects net purchases will end soon before it raises the key ECB interest rate.
The Governing Council intends to keep reinvesting in full the principal payments of maturing securities under the APP for a longer period of time beyond the date it raises the key ECB rates. In any case, for as long necessary to maintain favourable liquidity and ample monetary accommodation.
Key ECB Interest Rates The interest rate for the main refinancing operations, the marginal lending facility interest rate and the deposit facility interest rates will remain the same at 0.00% and 0.25% respectively.
The Governing Council supports its symmetric 2% inflation target. In line with its monetary strategy, it expects the key ECB rates to remain at or below their current levels until it sees inflation reaching 2%. It also believes that the realised progress in underlying inflation is sufficient to support inflation stabilising at 2% in the medium term.
This could also indicate a temporary period of moderately high inflation.
Refinancing operations. The Governing council will continue to monitor the bank funding situation and ensure that the maturing operations under the third series targeted longer-term refinancing operation (TLTRO III), does not hinder the smooth transmission its monetary policy.
The Governing council will regularly evaluate how targeted lending operations contribute to its monetary policy stance.
It has announced that it expects the special conditions under TLTRO III will end in June.
The Governing council will also evaluate the calibration of its two-tier reserve remuneration system so that banks’ intermediation ability in an environment of excess liquidity is not limited by the negative interest rate policy.
*** The Governing Council is ready to adjust any of its instruments as necessary to ensure that inflation stabilizes at 2% over the medium-term.
Today’s press conference will begin at 14:30 CET. The President of ECB will discuss the reasons behind these decisions.
