On February 3, the Governing Council confirmed the decisions taken at its monetary policy meeting last December, among which it will maintain interest rates and stop buying public debt by the end of March of this year.
In the first quarter of 2022, the Governing Council is making net asset purchases under the PEPP at a slower pace than in the previous quarter. It will end net asset purchases under the PEPP at the end of March 2022.
What is the Pandemic Emergency Procurement Program (PEPP)?
To counter the impact caused by COVID-19 on the euro area economy, the European Central Bank launched the Pandemic Emergency Purchase Program (PEPP) in March 2020.
The PEPP helps individuals and businesses gain access to the financing they need to cope with the crisis on affordable terms. This temporary program complements our other monetary policy measures, such as our other asset purchase programs and our targeted financing operations.
How does PEPP work?
The PEPP allows the ECB to purchase different types of assets in the financial markets. In doing so, the prices of those assets rise and, consequently, market interest rates fall. This supports the economy by making borrowing cheaper for individuals, businesses and governments. It also makes it easier for borrowers to repay their debts. This helps maintain the flow of credit, spending and investment despite the crisis caused by the pandemic.
To ensure that the monetary policy stance remains consistent with the stabilization of inflation at the Governing Council’s medium-term objective, monthly net purchases under the expanded asset purchase program (APP) will amount to €40 billion in the second quarter of 2022 and €30 billion in the third quarter. Starting in October, the Governing Council will maintain net asset purchases under the APP at a monthly pace of €20 billion for as long as necessary to reinforce the accommodative impact of its policy rates. The Governing Council expects the net purchases to end shortly before it begins to raise the key ECB interest rates.
As for the key ECB interest rates, 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.
To support its symmetric inflation target of 2% and in line with its monetary policy strategy, the Governing Council expects the key ECB interest rates to remain at or below their current levels.
Furthermore, the Governing Council stands ready to adjust all its instruments, as appropriate, to ensure that inflation stabilizes at its 2 percent objective over the medium term.