The ECB alleys the rise of types to tie the new inflation target of 2%

Two weeks after announcing the historical change in its inflation goal, the European Central Bank (ECB) has specified this Thursday on what this change translat

The ECB alleys the rise of types to tie the new inflation target of 2%

Two weeks after announcing the historical change in its inflation goal, the European Central Bank (ECB) has specified this Thursday on what this change translates and the most immediate is that interest rates will not only ride, but maybe they could even Go down to permanently secure the new price objective, which is now at 2%.

In other words, the entity will only raise interest rates when it see that inflation reaches that level "long before the end of its projection horizon" and only if it is maintained in a lasting way. Until now, the ECB was indicating that the rise of rates would occur when the prices converged "robustly" to their goal during the projections horizon.

According to the Communication issued by the Bank after the monthly meeting of its Government Council in Frankfurt, the ECB wants to emphasize "its commitment to maintain a posture of monetary policy persistently accommodated to meet its inflation goal."

In this goal and in line with its monetary policy strategy, the Governing Council "expects that the key interest rates of the ECB remain at its current or lower levels until inflation reaches 2% long before the end of its horizon of projection and lasting for the Rest "of this period, which is fixed for 2023.

The conditions for uploading types also include that the progress of underlying inflation is the "sufficiently advanced" to be "consistent" with which inflation stabilizes at 2% in the medium term. "This could involve a transient period in which inflation is moderately above the target," adds the statement.

In this way, the reference interest rates for the refinancing operations of the ECB remain at 0%; The ease of deposit rate will continue at -0.50% and the lendability of loan, at 0.25%.

With respect to the rest of monetary policy instruments, the ECB has not made changes. It will continue to buy in a flexible way actively within its Pandemic Purchase Program (PEP), equipped with a total acquisition capacity of 1.85 trillion euros until March 2022. The ECB will reverse the maturities under this program until the end of 2023.

The entity will also continue to perform net purchases of assets under its standard program (APP) at a monthly rhythm of 20 billion net "for as long as necessary" and reinvert the debt funds that haunt for a period of time "prolonged" after that interest rates begins to raise.

Lastly, the monetary authority has indicated that it will continue to provide "broad liquidity" through its refinancing operations, especially through the third program of long-term refinancing operations with a specific objective (TLTRO-III).

Date Of Update: 25 July 2021, 06:14

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