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ECB cut deposit facility interest rates 10 bps to .50% and leaves rates the main refinancing operations and the interest rates on the marginal lending facility unchanged. Softer than many expected. Announces rate tiering, and reintoduces QE


The European Central Bank announces its monetary policy decision for July 2019

The Governing Council of the European Central Bank decided that the interest rate on the main refinancing operations and the interest rates on the marginal lending facility and the deposit facility will remain unchanged at 0.00%, 0.25% and -0.40% respectively. The Governing Council expects the key ECB interest rates to remain at their present levels for an extended period of time, and well past the horizon of the net asset purchases

  • Main refinancing rate 0.00% UNCH
  • Marginal lending facility 0.25% UNCH
  • Deposit facility -0.50% -.10%
  • Announces rate tiering system
  • To introduce two-tier system for negative rate policy
  • Reintroduces QE, €20 billion per month from 1 November
  • Drops calendar-based forward guidance, will now be linked to inflation
  • Says to buy bonds as long as needed To stop purchases shortly before raising rates
  • Modalities of TLTROs will be changed
  • Sees rates at present or lower levels until inflation outlook robustly converges to central bank's aim

NB LTRO (Targeted Longer-Term Refinancing Operations) is best described as a long term loan to banks to increase loan creation. The banks lend above a specified benchmark and borrow from the ECB at a negative rate. This will provide an incentive for the banks to lend and thus increase private spending in the economy. That's the theory clearly has not been a great success so far.

Full statement by the ECB:

Changes via RANsquawk @RANsquawk



The President of the ECB will comment on the considerations underlying these decisions at a press conference starting at 14:30 CET today."

The statement of President Draghi ahead

ECB President Mario Draghi and Vice-President Vítor Constâncio explain the Governing Council's monetary policy decisions and answer questions from journalists at today’s press conference.

Webcast – 14:30 CET

Alternate player (audio: en,fr,de) Watch on Twitter @ECB

Live. https://www.ecb.europa.eu/home/html/index.en.html

Source: Euopean Central Bank

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