ECB leaves key rates unchanged, paving way for action in December

FRANKFURT, Oct. 29 (Xinhua) -- The European Central Bank (ECB) on Thursday decided to leave key interest rates unchanged and signaled that it stands ready to ramp up pandemic response in its December meeting.

The 19-nation eurozone base interest rate will remain at 0.00 percent, with the marginal lending rate and deposit rate remaining at 0.25 percent and minus 0.50 percent, respectively, according to a press release issued following the ECB's monetary policy meeting.

(Photo: agencies)

The ECB's Governing Council said it will continue its purchases under the pandemic emergency purchase program with a total envelope of 1,350 billion euros (1,580 billion U.S. dollars), as well as its regular asset purchase program. It will also continue to provide ample liquidity through refinancing operations, it said.

"In the current environment of risks clearly tilted to the downside, the Governing Council will carefully assess the incoming information, including the dynamics of the pandemic, prospects for a rollout of vaccines and developments in the exchange rate," the ECB noted in its statement.

The central bank said it will "recalibrate its instruments, as appropriate" on the basis of a new round of macroeconomic projections that are due in December.

ECB President Christine Lagarde told a press conference on Thursday afternoon that the Governing Council will look at "all the instruments" and how they interact with each other, in order to arrive at a best possible combination of tools that could address the situation.

Meanwhile, the central bank is going to use "all the instruments" it has already rolled out and use "all the flexibility", Lagarde also noted.

Economic data since the last policy meeting highlight the challenge facing the eurozone central bank as it aims at inflation rates of "below, but close to, 2 percent" over the medium term. Euro area annual inflation slid to minus 0.3 percent in September, from minus 0.2 percent in August.

Meanwhile, restriction measures are being reimposed across Europe to combat the second wave of infections, adding to the uncertainty surrounding the bloc's recovery.

"The resurgence in coronavirus infections presents renewed challenges to public health and the growth prospects of the euro area and global economies. Incoming information signals that the euro area economic recovery is losing momentum more rapidly than expected," Lagarde said.

The rise in COVID-19 cases and the associated intensification of containment measures is weighing on activities, constituting a clear deterioration in the near-term outlook, she added.

According to ECB's statement, a possible recalibration of instruments in December would set out to ensure that financing conditions remain favorable to support the economic recovery, as well as counteracting the negative impact of the pandemic on the projected inflation path.

"The ECB has clearly signaled that it will decide on further measures very soon," Marcel Fratzscher, president of Berlin-based German Institute for Economic Research, wrote in a comment, adding that fiscal policy would play an all the more important role especially in times when the ECB has only limited options to combat the crisis.

"For this reason, both an expansive national fiscal policy and the rapid implementation of the European recovery plan remain extremely important," Fratzscher wrote.