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Essentials of Monetary Policy

European Central Bank (ECB) - Ends Era of Negative Interest Rates

July 21, 2022
Hendrix Vachon
Principal Economist

Summary of the publication

  • The ECB increased the interest rate on the main refinancing operations and the interest rates on the marginal lending facility and the deposit facility by 50 basis points to 0.50%, 0.75% and 0.00% respectively.
  • It also approved the Transmission Protection Instrument (TPI), which can be activated to counter unwarranted, disorderly market dynamics that pose a serious threat to the transmission of monetary policy across the euro area. The scale of TPI purchases will depend on the severity of the risks facing policy
  • transmission, and purchases won’t be restricted ex ante.
  • The principal payments from maturing securities purchased under the asset purchase programme (APP) and the pandemic emergency purchase programme (PEPP) will be reinvested in full for an extended period of time. Maturing PEPP securities will be reinvested until at least the end of 2024.
  • Flexibly reinvesting PEPP securities will remain the first line of defence against divergent interest rates in the eurozone