ECB Keeps Rates Unchanged, Reaffirms Taper But May Increase QE In "Size And/Or Duration"

As expected, the ECB announced that there is no change to any of its three main rates, which will remain “at their present levels for an extended period of time, and well past the horizon of the net asset purchases.”

Main refinancing rate unchanged at 0.00%

Deposit facility rate unchanged at -0.40%

Marginal lending rate unchanged at 0.25%

Of note, the ECB confirmed that QE will be tapered at the “new monthly pace of €30 billion” which is intended to run until the end of September 2018, or beyond. But perhaps most importantly, the ECB Governing Council said that it “stands ready to increase the asset purchase programme (APP) in terms of size and/or duration” if “financial conditions become inconsistent with further progress towards a sustained adjustment in the path of inflation.” Some had suggested that this phrase could be struck out from the mon pol statement as the ECB seeks to nudge forward guidance. It did not.

Full statement below:

At today’s meeting the Governing Council of the ECB decided that the interest rate on the main refinancing operations and the interest rates on the marginal lending facility and the deposit facility will remain unchanged at 0.00%, 0.25% and -0.40% respectively. The Governing Council expects the key ECB interest rates to remain at their present levels for an extended period of time, and well past the horizon of the net asset purchases.

Regarding non-standard monetary policy measures, the Governing Council confirms that the net asset purchases, at the new monthly pace of €30 billion, are intended to run until the end of September 2018, or beyond, if necessary, and in any case until the Governing Council sees a sustained adjustment in the path of inflation consistent with its inflation aim. If the outlook becomes less favourable, or if financial conditions become inconsistent with further progress towards a sustained adjustment in the path of inflation, the Governing Council stands ready to increase the asset purchase programme (APP) in terms of size and/or duration. The Eurosystem will reinvest the principal payments from maturing securities purchased under the APP for an extended period of time after the end of its net asset purchases, and in any case for as long as necessary. This will contribute both to favourable liquidity conditions and to an appropriate monetary policy stance.

The President of the ECB will comment on the considerations underlying these decisions at a press conference starting at 14:30 CET today.