Eurozone Monetary Policy


Eurozone: ECB leaves key rates unchanged, begins purchase of euro-denominated public sector securities

March 5, 2015

The European Central Bank (ECB) decided to leave the main refinancing rate unchanged at the record low of 0.05% at its 5 March monetary policy meeting held in Nicosia. The ECB also kept the deposit rate—the rate banks receive for parking funds at the ECB—at minus 0.20% and left the marginal lending rate at 0.30%. Market analysts had anticipated the Bank’s decision to maintain the rates unchanged.

The Bank’s decision came amid an improving outlook for the Eurozone economy as growth momentum is continuing to strengthen. Nonetheless, the Bank recognized that downward risks to the outlook persist, although they have diminished following the Bank’s recent monetary policy decisions and partially as a result of the fall in oil prices. In fact, the Central Bank raised its growth forecasts for the bloc’s economy for both 2015 and 2016. On the inflation side, the Bank stated that the fall in consumer prices in February, which marked the third consecutive month of decline, was mainly due to the impact of the sharp drop in global oil prices. The Bank recognized, however, that it expects inflation to remain low or negative in the coming months, while it foresees it starting to rise gradually at the end of 2015.

Regarding the quantitative easing (QE) program that the ECB launched on 22 January, the Bank began the purchase of euro-denominated public sector securities in the secondary market on 9 March. The ECB had set a target for its monthly purchases at EUR 60 billion per month; considering that the pace of asset-backed securities (ABS) and covered bond purchases has been around EUR 12 billion per month since the programs started, this means that additional purchases of sovereign bonds will be set at around EUR 50 billion per month. The ECB set end-September 2016 as the deadline for the end of the purchase program and emphasized that it is open-ended in nature as the Bank will continue purchasing assets until it sees, “a sustained adjustment in the path of inflation which is consistent with our aim of achieving inflation rates below, but close to, 2% over the medium term.” ECB President Mario Draghi underlined that at the current stage, monetary authorities are not willing to enter into any discussion regarding if or when the pace of purchases may be adjusted, tapered or stopped.

Within this setting, almost all FocusEconomics panelists expect the ECB to maintain the policy rate unchanged at the current record-low of 0.05% over the course of the next two years.

Author:, Senior Economist

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Eurozone Monetary Policy Chart

Euro Monetary Policy March 2015

Note: ECB Refinancing Rate in %.
Source: European Central Bank (ECB).

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