The European Central Bank is increasing its monthly asset purchase program to €80 billion ($87 billion) from €60 billion beginning in April, the ECB announced Thursday.
The monthly asset purchase program was implemented last March and had been due to run until September 2016. In December, it was extended to March 2017 and perhaps beyond.
In a prepared statement for a news conference Thursday in Frankfurt, ECB President Mario Draghi said the higher asset purchase program amount is still intended to run until March 2017 “or beyond, if necessary, and in any case until the governing council sees a sustained adjustment in the path of inflation consistent with its aim of achieving inflation rates below, but close to, 2% over the medium term.”
Also, Mr. Draghi announced the governing council of the ECB will cut the interest rate on the main refinancing operations of the eurosystem, which provides the bulk of liquidity to the banking system, to zero from 0.05%. The interest rate on the marginal lending facility, which offers overnight credit to banks from the eurosystem, will be decreased to 0.25% from 0.3%; and the interest rate on the deposit facility, which banks may use to make overnight deposits with the eurosystem, will be cut 10 basis points to -0.4%. All cuts are effective March 16.
“To ensure the continued smooth implementation of our asset purchases, we also decided to increase the issuer and issue share limits for the purchases of securities issued by eligible international organizations and multilateral development banks from 33% to 50%,” Mr. Draghi said in the statement.
The central bank has also decided to include investment grade euro-denominated bonds issues by non-bank corporations established in the eurozone, in the list of assets eligible for regular asset purchases.