Despite record-high eurozone inflation, the European Central Bank maintained its gradual pace for winding down asset purchases in the third quarter, without setting a precise date on when it will hike interest rates.
The governing council of the central bank stated this in a press release. The ECB is grappling with how aggressively to tighten monetary policy in response to record inflation while the possibility of a major economic collapse grows as a result of Russia’s invasion of Ukraine.
The ECB is likely to begin raising interest rates after the bond-buying program is done, following in the footsteps of the Bank of England and the Federal Reserve of the United States.
Additionally, the monthly net purchases under the Asset purchase programme (APP) will amount to €40 billion in April, €30 billion in May and €20 billion in June
What the ECB is saying
- The ECB statement said that it now expects to conclude its net asset purchases in the third quarter. “At today’s meeting, the Governing Council judged that the incoming data since its last meeting reinforce its expectation that net asset purchases under the APP should be concluded in the third quarter,“ it said
- The Bank added that “The calibration of net purchases for the third quarter will be data-dependent and reflect the Governing Council’s evolving assessment of the outlook.”
- Although The ECB faces a unique dilemma, with inflation hitting a record high of 7.5% in March, it decided to hold rates steady.
- The ECB said, “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 -0.50% respectively.”
- The bank also stated that Russia’s aggression in Ukraine is causing enormous suffering and is also affecting the economy in Europe and beyond.