European Central Bank meeting today, March 10: interest rates unchanged.
lights up Lagarde: The press conference has just begun.
The conflict has undoubtedly changed the economic landscape. In the document issued by the European Central Bank at the end of the summit, we read that in the face of the new, I reviewed the APP purchasing program for the next few months.
Monthly net purchases under the app will be 40 billion euros in April, 30 billion euros in May and 20 billion euros in June. In the third quarter, calibration will depend on expectations.
In this way, the purchase program is seen as having expired earlier. Inflation may be a concern.
In a very complex framework of price stability, in European Central Bank meeting on March 10 It was not decided to stop the normalization of monetary policy.
Every mother Lagarde They will have a really big power in the markets. The press conference will be followed by Money.it live.
European Central Bank meeting: conference kicks off live
Lagarde explains that monetary policy normalization is not accelerating, but that a step-by-step gradient is followed and everything will depend on the human data being evaluated.
Lagarde begins answering questions from remote reporters.
Banks and Swift
Lagarde specified that the ban on some Russian banks in the Swift system did not create difficulties for the financial system in the eurozone.
Risks to the economy
Risks to the economic outlook have increased and are on the downside. Higher energy costs can lead to lower demand. Risks to inflation expectations tend to the upside in the short term
The Eurozone economy is expected to grow strongly in 2022 at the pre-war pace in Ukraine.
Monthly purchases are reviewed under the APP program: April 40 billion; May 30 billion and June 20 billion.
Lagarde said any rate adjustments would occur after the end of the implementation.
For Lagarde, long-term inflation expectations will surround the target.
The board believes that inflation is increasingly likely to stabilize at the 2% target. Inflation could be much higher in the short term.
Inflation is on the rise
Inflation is viewed as:
- 5.1% in 2022
- 2.1% in 2023
- 1.9% in 2024
Estimated core CPI: 2.6% in 2022; 1.8% in 2023 and 1.9% in 2024.
All expectations rose.
GDP forecast: 3.7% in 2022; 2.8% in 2023 and 1.6% in 2024.
Lagarde on the Russian invasion
The European Central Bank provides maximum support to the Ukrainian population and supports EU sanctions. It will make every effort to ensure stability. The war has an impact on energy prices and the extent of these effects will depend on the evolution of the conflict.
At today’s meeting, the European Central Bank considered several scenarios.
Lagarde wears a brooch in Ukrainian colors.
Start the conference
Lagarde started talking about the ECB meeting and the decisions taken.
Waiting for the conference
Everything is ready for Christine Lagarde’s press conference, which kicks off at 2:30pm.
up the euro
The EUR/USD pair extended its gains above 1.1100 for the first time in a week.
monetary policy decisions
The Russian invasion of Ukraine is a turning point for Europe. The Board of Directors expresses its full support to the Ukrainian people. It will ensure regular liquidity conditions and will enforce the sanctions decided by the European Union and European governments. The Governing Council will take all necessary measures to fulfill the ECB’s mandate to pursue price stability and protect financial stability.
Asset Purchase Program (APP)
Based on its updated assessment and consideration of the uncertain environment, the Board of Directors today revised the APP purchase program for the coming months. Monthly net purchases under the app will reach 40 billion euros in April, 30 billion euros in May and 20 billion euros in June. The calibration of net purchases for the third quarter will be data-driven and will reflect its evolving assessment of expectations. If the incoming data supports the expectation that medium-term inflation expectations will not subside even after our net asset purchases conclude, the Board will complete net purchases under APP in the third quarter. If medium-term inflation expectations change and financing conditions become inconsistent with further progress toward our 2 percent target,
The Governing Council also intends to continue to fully reinvest principal payments of outstanding securities purchased under the APP for an extended period of time after the date on which the ECB’s key rate hike begins, and in any event, for as long as is necessary to maintain favorable liquidity conditions and a degree of Great cash facility.
European Central Bank key interest rates
The interest rate on the main lending facility, the interest rate on the marginal lending facility and the deposit facility will remain unchanged at 0.00%, 0.25% and -0.50%, respectively.
Any adjustments to the ECB’s key interest rates will occur some time after the Governing Council net purchases within the end of application and will be gradual. The path of the ECB’s key interest rates will continue to be determined by the future guidance of the Governing Council and its strategic commitment to stabilizing inflation at 2 per cent over the medium term. As a result, the Governing Council expects the ECB’s key interest rates to remain at current levels until inflation reaches 2 percent before the end of its forecast horizon, and on a sustainable basis for the rest of the year. Projection horizon, and progress is believed to have been made because core inflation is advanced enough to correspond with inflation stabilizing at 2% over the medium term.
Epidemiological Emergency Purchase Program (PEPP)
In the first quarter of 2022, the Board of Directors is purchasing net assets under the General Environmental Protection Scheme at a slower pace than in the previous quarter. Net asset purchases under the PEPP will be suspended at the end of March 2022.
The Board of Directors intends to reinvest the principal payments of outstanding securities purchased under the PEPP at least until the end of 2024. In any case, the future rotation of the PEPP portfolio will be managed to avoid interference with the appropriate monetary policy stance.
The pandemic has shown that, under difficult circumstances, flexibility in the planning and conduct of asset purchases has helped counteract the decline in monetary policy transmission and made the board’s efforts to achieve its objective more effective. Within the mandate of the Governing Council, and under tight conditions, flexibility will remain an element of monetary policy when threats to monetary policy transmission threaten the achievement of price stability. In particular, in the event of renewed market segmentation related to the pandemic, PEPP reinvestments can be flexibly adapted over time, across asset classes and jurisdictions at any time. This could include buying bonds issued by the Hellenic Republic as well as renewing redemptions in order to avoid disrupting purchases in that jurisdiction, which could jeopardize the transmission of monetary policy to the Greek economy while it is still recovering from the fallout from the Greek economy epidemic. Net purchases under the Environmental Protection Scheme can also be resumed, if necessary, to counteract the negative shocks related to the pandemic.
The Board of Directors will continue to monitor banks’ funding conditions and ensure that maturity of operations under TLTRO III does not impede the appropriate transfer of its monetary policy. The Board of Governors will also regularly assess how targeted lending operations contribute to its monetary policy stance. As announced, the special terms applicable under TLTRO III are expected to expire in June of this year. The Board will also consider appropriate calibration of its two-tiered system of reserve reward so that negative interest rate policy does not limit banks’ ability to broker in an environment of too much liquidity.
Liquidity lines with central banks outside the eurozone
In light of the highly ambiguous context caused by the Russian invasion of Ukraine and the risk of regional repercussions that could negatively affect the financial markets of the Eurozone, the Board of Directors decided to extend the repo mechanism until January 15, 2023. Eurosystem of Central Banks (EUREP). Thus, EUREP will continue to complement the regular arrangements to provide liquidity in Euros to central banks outside the Eurozone. Together, these form a comprehensive set of support structures to address potential Euro liquidity needs in the event of market failure outside the Eurozone which could adversely affect the correct transmission of the ECB’s monetary policy. Requests for individual Euro liquidity facilities by central banks outside the Eurozone will be evaluated by the Governing Council on a case-by-case basis.
fixed interest rates
Interest rates remain unchanged at zero. The deposit rate is also stable at -050% and its rate for margin lending stays at 0.25%
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