At its monetary policy meeting held on June 4th, the Governing Council of the European Central Bank (ECB) decided to leave the interest rates on the main refinancing operations and the interest rates on the marginal lending facility and the deposit facility unchanged at 0.00%, 0.25% and -0.50%, respectively, as expected.
More importantly, the ECB announced that it expanded its Pandemic Emergency Purchase Programme (PEPP) by €600 billion to €1,350 billion.
Follow our live coverage of ECB's policy announcements and the market reaction.
Market reaction
With the initial market reaction, the EUR/USD pair gained nearly 50 pips in a matter of minutes and was last seen trading at 1.1250, up 0.15% on the day.
Related articles
ECB Quick Analysis: Frankfurt's firepower joins Berlin's boost, EUR/USD higher levels to watch.
One-two punch – in favor of the euro. Less than 24 hours have passed since German Chancellor Angela Merkel announced a €130 billion stimulus plan, and in Frankfurt, on the other side of Europe's largest economy, another stimulus boost came.
ECB expands economic support for the eurozone.
Central bank increases the Pandemic Emergency Purchase Program by €600 billion. Bond program proceeds to reinvested until at least the end of 2022.
Key takeaways from the policy statement
"In response to pandemic-related downward revision to inflation over projection horizon, PEPP expansion will further ease general monetary policy stance, supporting funding conditions in real economy, especially for businesses and households."
"Purchases will continue to be conducted in a flexible manner over time, across asset classes and among jurisdictions."
"This allows ECB to effectively stave off risks to smooth transmission of monetary policy."
"Horizon for net purchases under PEPP will be extended to at least end of June 2021."
"In any case, ECB will conduct net asset purchases under PEPP until it judges that coronavirus crisis phase is over."
"Maturing principal payments from securities purchased under PEPP will be reinvested until at least end of 2022."
"In any case, future roll-off of PEPP portfolio will be managed to avoid interference with appropriate monetary stance."
"Net purchases will continue at a monthly pace of €20 billion, together with purchases under additional €120 billion temporary envelope until end of year."
"ECB continues to expect monthly net asset purchases under APP to run for as long as necessary to reinforce accommodative impact of its policy rates, and to end shortly before it starts raising interest rates."
"Reinvestments of principal payments from maturing securities purchased under app will continue, in full, for an extended period of time past date when ECB starts raising interest rates, and in any case for as long as necessary to maintain favourable liquidity conditions and an ample degree of monetary accommodation."
"ECB expects interest rates to remain at their present or lower levels until it has seen inflation outlook robustly converge to a level sufficiently close to, but below, 2% within its projection horizon, and such convergence has been consistently reflected in underlying inflation dynamics."
"ECB continues to stand ready 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."
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.
Recommended content
Editors’ Picks
EUR/USD extends losses to near 1.1150 on increased dovish ECB bets
EUR/USD accelerates decline to near 1.1150 in European trading on Friday. Softer French inflation data ramped up Oct ECB rate cut bets, weighing on the Euro. However, the downside could be cushioned by the renewed US Dollar weakness, as US PCE inflation looms.
USD/JPY slides 1% toward 143.00 as Ishiba wins LDP leadership race
USD/JPY is seeing a fresh sell-off toward 143.00 in the European session on Friday. The pair loses over 300 pips, as the Japanese Yen rebounds on Shigeru Ishiba's win in the LDP leadership run-off. Sanae Takaichi, who favored keeping interest rates lower, was expected to win the race.
Gold price pulls back from record high ahead of US PCE Price Index, bullish bias remains
Gold price attracts some sellers on the last day of the week and retreats further from the all-time peak, around the $2,685-2,686 region touched on Thursday. The downtick is sponsored by the emergence of some US Dollar buying, which tends to undermine demand for the commodity.
US core PCE set to show continued disinflation trend, reinforcing Federal Reserve easing cycle
The core Personal Consumption Expenditures Price Index is seen rising 0.2% MoM and 2.7% YoY in August. Markets have already priced in near 50 bps of easing in the next two Federal Reserve meetings. A firm PCE result is unlikely to move the Fed’s stance on policy.
RBA widely expected to keep key interest rate unchanged amid persisting price pressures
The Reserve Bank of Australia is likely to continue bucking the trend adopted by major central banks of the dovish policy pivot, opting to maintain the policy for the seventh consecutive meeting on Tuesday.
Five best Forex brokers in 2024
VERIFIED Choosing the best Forex broker in 2024 requires careful consideration of certain essential factors. With the wide array of options available, it is crucial to find a broker that aligns with your trading style, experience level, and financial goals.