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The ECB introduces stimulus package to counter coronavirus


Following the March meeting, the European Central Bank (ECB) left key interest rates at the same levels, but presented a stimulus package to combat the effects of coronavirus.

The central bank has announced measures to support bank lending and has expanded its program of quantitative easing (QE) by €120 billion.

The ECB left the interest rate on loans at zero. The Central Bank also kept the rate on deposits at minus 0.5% per annum, the rate on margin loans – at the level of 0.25% per annum.

“The Governing Council expects the ECB’s key interest rates to remain at their current or lower levels until it sees that the inflation forecast is steadily approaching a level close enough, but below 2% within its forecast horizon, and such rapprochement is consistently reflected in the dynamics of core inflation”

The European Central Bank

The ECB also announced additional net asset purchases of €120 billion by the end of 2020.

“In combination with the existing Asset Purchase Program (APP), this will support favorable financing conditions for the real sector of the economy in a period of heightened uncertainty”

The European Central Bank

Additional long-term refinancing operations (LTRO) will be temporarily conducted to maintain liquidity in the eurozone financial system, the ECB said.

Regarding targeted long-term refinancing operations (TLTRO III), the ECB noted that “significantly more favorable conditions” will apply between June 2020 and June 2021.

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

The European Central Bank

During this period, the interest rate on these TLTRO III transactions will be 25 basis points below the average rate used in the Eurosystem for major refinancing operations.

ECB head Christine Lagarde said earlier this week that Europe could face a serious economic shock comparable to the global financial crisis if governments in the region do not take urgent measures to deal with the consequences of COVID-19.

The Bank of England urgently cut its base rate on Wednesday after a similar decision by the US Federal Reserve last week. The ECB was also expected to lower rates to support the economy amid the outbreak of coronavirus, which, according to the World Health Organization, has grown into a pandemic.

Lena S.
Lena is an adventurous soul searching the world for truth and balance. She is a mother of 2 beautiful daughters and a full time writer for Financial News where she covers various topics from finance, government, politics, current events, crypto and technology.

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