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Financial News: ECB To End Pandemic Stimulus In March 2022

ECB To End Pandemic Stimulus In March 2022

12/16/2021 - 08:26:00 (RTTNews)

(RTTNews) - The European Central Bank said on Thursday that it will discontinue purchasing assets under its Covid-19 pandemic stimulus scheme at the end of March next year.

The EUR 1,850 billion pandemic emergency purchase programme, or PEPP, was launched in March 2020 to support the euro area economy and financial system amid the risks posed by the disruptions caused by the coronavirus pandemic. The Governing Council decided to extend the reinvestment horizon for the PEPP to until at least the end of 2024, the bank said. Earlier, the reinvestments were set to end at the end of 2023. Policymakers also decided a monthly net purchase pace of EUR 40 billion in the second quarter and EUR 30 billion in the third quarter under the asset purchase programme, or APP. Monthly asset purchases under the scheme are currently conducted at EUR 20 billion. Further, the ECB said net purchases under the PEPP could also be resumed, if necessary, to counter negative shocks related to the pandemic.

From October 2022 onwards, the Governing Council will maintain net asset purchases under the APP at a monthly pace of EUR 20 billion for as long as necessary to reinforce the accommodative impact of its policy rates, the bank said. The ECB reaffirmed that it expects net purchases to end shortly before it starts raising the key ECB interest rates.

The bank left its key interest rates unchanged as expected. The main refinancing rate thus remains at zero, the deposit rate at -0.50 percent and the marginal lending rate at 0.25 percent. "The Governing Council expects the key ECB interest rates to remain at their present or lower levels until it sees inflation reaching 2 percent well ahead of the end of its projection horizon and durably for the rest of the projection horizon, and it judges that realised progress in underlying inflation is sufficiently advanced to be consistent with inflation stabilising at 2 percent over the medium term," the bank said.

The bank reiterated that it expects the special conditions applicable under its targeted lending operation, TLTRO III, to end in June next year. The ECB has entered into a very cautious tapering process, ING economist Carsten Brzeski said.

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