ECB leaves key rates unchanged in September monetary policy meeting, as expected

Author: Justin Low | Category: Central Banks

ECB announces their latest monetary policy decision - 9 September 2021

  • Deposit facility rate -0.50%
  • Main refinancing rate 0.00%
  • Marginal lending facility 0.25%
  • ECB judges that favourable financing conditions can be maintained with a moderately lower pace of PEPP purchases
  • APP purchases to continue at a monthly pace of €20 billion
  • Expects APP purchases to continue for as long as necessary to reinforce accommodative impact of policy rates
  • ECB will continue to conduct PEPP purchases in a total envelope of €1,850 billion until at least March 2022
  • Stands ready to adjust all instruments to ensure inflation stabilises at 2% target over the medium-term
  • Full statement
There's the taper that some market participants is looking for with the key passage reading:

Based on a joint assessment of financing conditions and the inflation outlook, the Governing Council judges that favourable financing conditions can be maintained with a moderately lower pace of net asset purchases under the PEPP than in the previous two quarters.
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In any case, as mentioned earlier here, the optics may suggest a more hawkish tilt but essentially this will be balanced out by continued (and likely higher) APP purchases once the PEPP envelope expires in March next year.

So, it is basically just an operational/technical taper by definition.

The euro had a brief jump from 1.1830 to 1.1840 but is pretty much little changed after the decision now. Lagarde's press conference may provide more details on how much they may scale back on purchases but I reckon she'll keep that more vague.

Instead, the bump to growth and inflation forecasts will be ones to watch (especially for 2022, 2023) as that will outline any potential change in stance towards APP purchases. However, that is still a debate that will only gain importance next year.

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