Following a meeting of its governing council, the European Central Bank announced Thursday that interest rates on the main refinancing operations of the eurosystem, which provides the bulk of liquidity to the banking system, will remain at zero.
The marginal lending facility, which provides overnight credit to banks from the eurosystem, stays at 0.25%. Interest rates on the deposit facility, which is used by banks to make overnight deposits, will remain at -0.4%.
The governing council expects the key ECB interest rates to remain at lower levels for an extended period of time, and well past the horizon of its asset purchase program, said a news release.
The ECB will continue asset purchases at the current monthly pace of €80 billion ($84 billion) until the end of March 2017.
As announced in December, asset purchases will from April 2017 continue at a monthly pace of €60 billion until the end of the year, or beyond if necessary, until the governing council sees "a sustained adjustment in the path of inflation consistent with its inflation aim."
“Recovery is resilient and inflation is mostly driven by the oil price. Looking ahead, the oil future price indicates that the inflation is likely to pick up further,” Mario Draghi, ECB president, said at a press conference.
However, he added, “the governing council did not discuss tapering today.”
Addressing the shortage of eligible assets to purchase, which sparked the discussion about tapering late last year, Mr. Draghi said that “purchases below the deposit rate should correct this shortage.”
Mr. Draghi also reiterated the bank's readiness to return to the same level of quantitative easing should the financial conditions deteriorate.
“If the outlook becomes less favorable, or if financial conditions become inconsistent with further progress toward a sustained adjustment in the path of inflation, the governing council stands ready to increase the program in terms of size and/or duration,” added the release.
The ECB confirmed in a separate news release after the press conference that the purchase of assets below the deposit facility rate, which stands at -0.4%, will occur for the asset purchase program only.
“No purchases below the deposit rate will be conducted under the third covered bond purchase program, the asset-backed securities purchase program or the corporate sector purchase program,” the council said in the release.