ECB keeps its rates unchanged and reduces bond repurchases

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At its meeting on 9 September 2021, the European Central Bank (ECB) left – for the time being – interest rates and other bank rates unchanged. Interest rates on the ECB’s benchmark refinancing rate is still at 0%, marginal lending facility at 0.25% and the rate on the main deposit facility remains at -0.5% per annum. However, as part of its monetary policy, due to rising inflation in the eurozone, the ECB has reduced bond purchases.


This has slightly revived interest in the single European currency, the euro (EUR) on the foreign exchange – Forex market, and its exchange value increased, especially against the US dollar (USD). On Friday morning, 10 September 2021, at 7:48 am CET, the EUR/USD global currency pair traded on Forex market at a mutual exchange rate of US$ 1.183 per EUR with the current daily strengthening of the EUR by +0.04% against the USD. This mutual exchange rate was achieved while the USD, according to the dollar index DXY (US Dollar Currency Index), which compares the USD with the other six major world currencies, was seen at a price level of 92.49 with a slight growth of +0.01%.


At a press conference on Thursday after the meeting of the Governing Council of the ECB that took place on 9 September 2021, the President of the ECB Christine Lagarde, stated that the verdict was “an unanimous decision in all respects”. “Based on a joint assessment of financing conditions and inflation prospects, the Governing Council considers that favourable financing conditions can be maintained with a moderately lower asset purchase rate under the PEPP program than in the previous two quarters,” the ECB statement stated. The ECB reiterated that interest rates will remain at their current or lower levels until inflation will reach 2% “well ahead of the end of its projection horizon and durably for the rest of the projection horizon” and until the ECB decides to stabilise inflation over the medium term to 2% year-on-year. Inflation in the eurozone reached a maximum of 3% p.a. in August 2021. During August 2021, gross domestic product (GDP) in the eurozone reached 2%, exceeding economists’ expectations.


The markets eagerly awaited the latest political decision of the Frankfurt institution due to signs of the impending release of stimuli from the pandemic period, amid rising inflation and strong economic growth. Some analysts have suggested for the ECB to announce in December the reduction of its Covid stimulus package, with the Federal Reserve System (Fed) signalling that bond buyouts are likely to begin declining by the end of 2021. “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,” the ECB Governing Council said in a statement.

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