ECB rate decision: January 2021 meeting



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President of the European Central Bank (ECB) Christine Lagarde.

FRANCISCO SECO | AFP | Getty Images

LONDON – The European Central Bank kept interest rates unchanged on Thursday as euro countries continue to fight the spike in Covid-19 infections and subsequent lockdowns.

The main refinancing operations, the marginal lending facility and the ECB’s deposit facility will remain at 0.00%, 0.25% and -0.50% respectively, he said in a statement.

The ECB stepped up its massive stimulus program in December to support economic recovery in the region. Its Pandemic Emergency Purchase Program (PEPP) has been extended until March 2022, totaling 1.85 trillion euros ($ 2.25 trillion) in bond purchases. This allows eurozone governments to obtain cheaper rates when borrowing on public markets.

However, doubts remain about how the eurozone will cope this year, following a 7.3% drop in GDP (gross domestic product) last year, according to ECB forecasts.

The new year has started with stricter social restrictions and national lockdowns in many of the 19 countries that share the single currency. Germany this week, for example, extended a nationwide lockdown until February 14. The Netherlands have announced that there will be a curfew from next week. And France chose to step up its curfew hours earlier this month, while Portugal will close schools from Friday.

There have been over 16 million Covid-19 infections in the EU and more than 400,000 deaths to date, according to the European Center for Disease Prevention and Control.

However, European leaders hope to speed up vaccinations in the coming months in order to contain the spread of the virus and its economic impact. The European Commission, the EU’s executive arm, has asked member states to vaccinate at least 70% of their adult populations by summer.

Despite the difficult situation, the ECB maintained its growth forecast for this year. Speaking at an event earlier this month, Central Bank President Christine Lagarde said: “I think our latest projections in December are still very clearly plausible.” In December, the bank estimated a GDP rate of 3.9% for 2021 and 2.1% for 2022.

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