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Thomas StorringDirector – Economics and Statistics
Tel: 902-424-2410Email:

July 16, 2020

The European Central Bank announced today that key interest rates would remain unchanged at their current levels. They are expected to remain at their present or lower levels until the inflation outlook converge to a level sufficiently close to, but below the target rate of 2 per cent consistently.

With the impact of the COVID-19 pandemic, the Euro Area faces an economic contraction that is unprecedented in peacetime.  Consumer and business sentiment measures have plunged, suggesting a sharp contraction is underway in economic growth and labour markets.

Recent indicators since the last monetary policy meeting in early June signal to a pickup in the euro area economic activity, although the level of economic activity remains below the pre-COVID levels. While the economic indicators bottomed out in April, the recovery in May and June has been partial and uneven across member states. Consumer spending and business investment are held up by increased uncertainties about the pace of the pandemic and the global economic outlook. With a far longer period of disruption and lockdown taking place in the second quarter of 2020, economic output is expected to have contracted significantly more than in the first quarter.

The ECB has already undertaken significant easing measures since March, complemented by fiscal initiatives by governments across the Euro Area. However, given the highly uncertain outlook, the Governing Council reconfirmed their very accommodative monetary policy will remain in place to support economic recovery and price stability. These measures include:

  1. Continuation of purchases under the pandemic emergency purchase programme (PEPP) with a total envelope of €1,350 billion. These purchases contribute to easing the overall monetary policy stance, thereby helping to offset the pandemic-related downward shift in the projected path of inflation.
  2. Continuation of net purchases under the asset purchase programme (APP) at a monthly pace of €20 billion, together with the purchases under the additional €120 billion temporary envelope until the end of the year. The Governing Council continues to expect monthly net asset purchases under the APP to run for as long as necessary to reinforce the accommodative impact of its policy rates, and to end shortly before it starts raising the key ECB interest rates.
  3. Continuation of refinancing operations, particularly the latest operation in the third series of targeted longer-term refinancing operations (TLTRO III).

The Governing Council will do everything necessary within its mandate and is fully prepared to adjust all of its instruments, as appropriate, to ensure that inflation moves towards its aim in a sustained manner, in line with its commitment to symmetry.



European Central Bank: Monetary Policy DecisionRemarks

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