ECB Decides Additional 120 Billion Euro Net Asset Purchases for Economic Stimulus... Interest Rates Held Steady

[Image source=EPA Yonhap News]

[Asia Economy Reporter Lim Cheol-young] The European Central Bank (ECB) has unveiled an economic stimulus package.

On the 12th (local time), the ECB held a monetary policy meeting in Frankfurt, Germany, and announced that despite the COVID-19 pandemic, it would keep the benchmark interest rate unchanged while implementing temporary measures such as expanded asset purchases and low-interest long-term loans. The ECB plans to conduct additional asset purchases worth 120 billion euros by the end of this year.

First, after holding the monetary policy meeting, the ECB kept the benchmark interest rate at 0%. The marginal lending rate and deposit rate were also maintained at the current levels of 0.25% and -0.50%, respectively.

Additionally, the ECB stated it would temporarily carry out additional net asset purchases amounting to 120 billion euros (approximately 163 trillion won) by the end of this year. It also decided to implement a temporary Long-Term Refinancing Operation (LTRO).

The ECB mentioned, "There are no signs of liquidity shortages in the financial markets and banking system, but these policies will provide an effective backstop if necessary."

This decision was made to overcome the global economic uncertainty caused by the spread of COVID-19. The World Health Organization (WHO) declared a pandemic for COVID-19, leading to a plunge in global stock markets.

However, some view the announcement as falling short of expectations. Andrew Kenningham, Chief European Economist at Capital Economics, pointed out, "It will only mitigate the economic shock to some extent."

Meanwhile, central bank governors from Italy, Latvia, Lithuania, Estonia, Portugal, and other countries participated remotely via video conference in the monetary policy meeting held in Frankfurt, Germany.