FRANKFURT (Reuters) - The European Central Bank left its ultra-easy policy unchanged as expected on Thursday but kept the door open to more stimulus as the outlook sours amid a spreading COVID-19 pandemic.
Having extended support well into next year with a massive stimulus package in December, the ECB is already providing nearly all the help it can and the flexibility built into its measures allows the bank to ramp up bond purchases without a fresh decision by policymakers.
Although no further changes to policy are seen for months and possibly all year, widening lockdown measures and the slow pace of vaccinations challenge the ECB’s projection of a quick economic rebound from the second quarter and raise the risk that more stimulus may be needed sooner rather than later.
“The Governing Council continues to stand ready to adjust all of its instruments, as appropriate, to ensure that inflation moves towards its aim in a sustained manner, in line with its commitment to symmetry,” the ECB said after a regular policy meeting.
The increased risk to the economic outlook is likely to be the focus of ECB President Christine Lagarde’s 1330 GMT news conference but economists expect her to strike a balanced tone, arguing that longer-term prospects remain broadly unchanged even if the coming quarter or two may be weaker than projected.
With Thursday’s decision, the ECB maintains its Pandemic Emergency Bond Purchase (PEPP) quota at 1.85 trillion euros and expects the buys to run at least until March 2022.
“If favourable financing conditions can be maintained with asset purchase flows that do not exhaust the envelope over the net purchase horizon of the PEPP, the envelope need not be used in full,” the ECB said.
The bank also kept its deposit rate at minus 0.5% and will continue to provide banks with long term loans at rate of minus 1%.
Reporting by Balazs Koranyi; Editing by Catherine Evans
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