The ailing European economy still struggles to recover from the effects of the virus. Today’s ECB meeting focused on the Euro’s interest rate, the PEPP, the APP, the TLTRO III with more measures to come if the situation does not show the desired improvement.

2020 saw a drop in GDP of 7.8% for the 19 countries that share the Euro with the expectation that this year would boost their economies back by 4.2%.

First, 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. These values are expected to remain as is within this year as inflation projections are below the 2% target, set by the ECB.

Second, the Governing Council will continue the purchases under the pandemic emergency purchase program (PEPP) with a total envelope of €1,850 billion. This program is expected to be maintained until at least March of 2022. The values can be amended if unfavorable conditions arise.

Third, net purchases under the asset purchase program (APP) will continue at a monthly pace of €20 billion. The Governing Council continues to expect monthly net asset purchases under the APP to run for as long as necessary to reinforce the accommodative impact of its policy rates, and to end shortly before it starts raising the key ECB interest rates.

Finally, the Governing Council will continue to provide ample liquidity through its refinancing operations. In particular, the third series of targeted longer-term refinancing operations (TLTRO III) remains an attractive source of funding for banks, supporting bank lending to firms and households.

This in effect means that the ECB purchases are reducing bond market borrowing costs, which makes it easier for governments to increase expenditures without having to pay the higher interest rates, associated with regular debt.