The European Central Bank (ECB) on Thursday decided to lower the interest rate of deposit facility by 10 basis points to minus 0.3 percent. "At today's meeting, the Governing Council of the ECB decided that the interest rate on the deposit facility will be decreased by 10 basis points to minus 0.3 percent, with effect from Dec. 9 2015," said a statement made by the ECB.
The interest rate on the main refinancing operations and the interest rate on the marginal lending facility will remain unchanged at 0.05 percent and 0.3 percent respectively. The ECB decided to extend the asset purchase program (APP), which was intended to last at least until September 2016.
"The monthly purchases of 60 billion euros (65 billion U.S. dollars) under the APP are now intended to run until the end of March 2017, " said Mario Draghi, president of the ECB, at a press conference following the governing council meeting.
The APP could be extended even beyond March 2017, if necessary, until the central bank sees a sustained adjustment in the path of inflation consistent with its aim of achieving inflation target, he added.
Draghi pointed out that the ECB decided to reinvest the principal payments on the securities purchased under the APP as they mature, for as long as necessary. He later explained in response to a question that the bonds will stay on the balance sheet of the ECB after March 2017.
In addition, the ECB decided to include euro-denominated marketable debt instruments issued by regional and local governments located in the euro area in the public sector purchase program in the list of assets, which are eligible for regular purchases by the respective national central banks.
With regard to main refinancing operations and three-month longer-term refinancing operations, the ECB decided they should continue as fixed rate tender procedures with full allotment for as long as necessary.
"Our new measures will ensure accommodative financial conditions and further strengthen the substantial easing impact of the measures taken since June 2014, which have had significant positive effects on financing conditions, credit and the real economy." ECB did not expand the size of the monthly purchase of assets. Draghi said the governing council thought the measures should be adequate for the ECB to achieve its goal.
Statistics show real gross domestic product in the euro area grew by 0.3 percent in the third quarter. According to Draghi, the monetary policies taken by the ECB were working.
"Looking ahead, we expect the economic recovery to proceed," he said. The December 2015 Eurosystem staff macroeconomic projections for the euro area foresees annual real GDP increasing by 1.5 percent in 2015, 1.7 percent in 2016 and 1.9 percent in 2017.
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