ECB maintains rates and overall asset purchases but slows the rate of purchases

The ECB has held its main interest rates steady and has continued with its asset purchases:

  • Main refinancing rate at 0.00%
  • Deposit rate at -0.50%.
  • Asset Purchase Programme (APP) at €20bn per month
  • Pandemic Emergency Purchase Programme (PEPP) at an overall envelope of €1,850bn, until at least the end of March 2022. 

However, in what was a slight hawkish lean, the ECB will reduce the pace of its PEPP purchases at a “moderately lower pace”. For the past two quarters, the PEPP purchases had been conducted at a “significantly higher pace” than the first months of the year. 


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There were almost no other significant changes to the statement from the Governing Council.

What does this mean?

This move is mildly hawkish and it depends upon where you get your information as to whether this was expected (for example, highly respected bank ING were not). 

It is certainly arguable that the ECB has just started to move away from its ultra-loose monetary policy stance. The issue is that any pace of normalisation of policy is still likely to be glacial.

The key for the press conference will now be how the ECB reacts to the higher than expected inflation data recently. How does this impact the 2022 inflation projections?


Initial Market Reaction

EUR has been initially a little choppy but the hawkish lean is EUR supportive and this has helped to usher EUR/USD higher by around +5/+10 pips.


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