Base Interest Rate 0%
Inflation Rates in 19 Eurozone Countries Exceed ECB Target Last Month
[Asia Economy Reporter Ki Ha-young] The European Central Bank (ECB) has kept its key interest rate at 0%. In March, the ECB decided to accelerate its bond purchase pace in response to the COVID-19 crisis, and it has decided to maintain that pace.
On the 10th (local time), the ECB held a monetary policy meeting in Frankfurt, Germany, and announced that it would keep the key interest rate at the current 0%, and maintain the deposit rate and marginal lending rate at -0.50% and 0.25%, respectively.
To address the economic impact of the COVID-19 outbreak, the ECB plans to maintain the bond purchase volume under the Pandemic Emergency Purchase Programme (PEPP) at at least 1.85 trillion euros (2,500 trillion won) until the end of March next year.
In the monetary policy statement released that day, the ECB said, "We are ready to deploy all appropriate instruments to ensure that inflation continues to approach our target balance," and added, "Funding conditions and inflation forecasts are consistent with last month's assessment, so we have decided to conduct COVID-19 response bond purchases under the PEPP program this quarter at a significantly higher pace than in the first few months of this year."
The ECB had earlier decided on March 11 to increase the pace of COVID-19 response bond purchases this quarter significantly compared to the first few months of this year, and it has maintained this pace in April and this month as well.
The ECB will also continue its Asset Purchase Programme (APP) at a scale of 20 billion euros per month (approximately 27 trillion won) and continue providing liquidity through the Targeted Longer-Term Refinancing Operations (TLTRO III).
Europe's inflation rate exceeded the ECB's monetary policy target of maintaining it at a "level close to 2%" last month. Foreign media pointed out that this is unusual compared to the past decade, during which Europe's inflation rate mostly remained below the target.
According to Eurostat, the statistical office of the European Union (EU), consumer prices in the 19 eurozone countries rose by 2.0% in May compared to a year earlier, marking the highest level in 2 years and 7 months since October 2018. The acceleration in inflation is analyzed to be influenced by rising energy prices, including international oil prices.
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