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ECB leaves interest rates unchanged in March as expected, announces additional LTRO

At its monetary policy meeting held on March 12th, the Governing Council of the European Central Bank (ECB) decided to leave the interest rates on the main refinancing operations and the interest rates on the marginal lending facility and the deposit facility unchanged at 0.00%, 0.25% and -0.50%, respectively, as expected. Attention now turns to ECB President Christine Lagarde’s first press conference at 13:30 GMT.

With the initial reaction, the EUR/USD pair gained traction and was last seen trading at 1.1260, adding 0.15% on the day.

Key takeaways from the policy statement

“Additional LTRO (TLTROs) will be conducted, temporarily, to provide immediate liquidity support to euro area financial system.”

“ECB does not see material signs of strains in money markets or liquidity shortages in banking system, these operations will provide an effective backstop in case of need.”

“TLTROs will provide liquidity at favourable terms to bridge period until TLTRO III operation in June 2020.”

“Considerably more favourable terms will be applied during period from June 2020 to June 2021 to all TLTRO III operations outstanding during that same time.”

“These operations will support bank lending to those affected most by spread of coronavirus, in particular small and medium-sized enterprises.”

“Throughout this period, interest rate on these TLTRO III operations will be 25 basis points below average rate applied in eurosystem’s main refinancing operations.”

“For counterparties that maintain their levels of credit provision, the rate applied in these operations will be lower, and, over period ending in June 2021, can be as low as 25 basis points below-average interest rate on the deposit facility.”

“A temporary envelope of additional net asset purchases of €120 billion will be added until end of year, ensuring a strong contribution from private sector purchase programmes.”

“In combination with existing app, this will support favourable financing conditions for real economy in times of heightened uncertainty.”

“ECB continues to expect net asset purchases to run for as long as necessary to reinforce accommodative impact of its policy rates, and to end shortly before it starts raising interest rates.”

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