This week, the Government Council released its decision on the monetary policy to support households, firms and banks during the current economy disfunction. The Council conducted the following package made of “ambitious and coordinated fiscal policy response”:

  1.  In order to immediately provide liquidity support until June 2020, the Long-Term Refinancing Operation (LTROs) – injecting low interest rate funding to banks with sovereign debt as collateral on the loans – will be delivered as being an effective backstop in case of need, carried out as a fixed rate tender procedure via an auction mechanism and an interest rate amounting to the average rate on deposit facility (-0,50%).
  2. Afterwards, from June 2020 to June 2021, the Targeted Long-Term Refinancing Operations (TLTROs) will be applied to push banks to lend to small, medium-sized enterprises and households. With an interest rate on these TLTRO III being at 25 basis points below the average rate applied: The Main Refinancing Operation rate (MRO), rate at which banks can borrow money from the ECB.
  3.  The European Central Bank decided not to change its interest rate on the main refinancing operations (0,00%), the interest rates on the margin lending facility (0,25%) and its deposit facility (-0,50%).
  4.  It also decided to raise the bank’s asset purchases by a temporary envelope of an additional € 120 billion until the end of the year in order to concentrate on bonds issued by companies and to further lower borrowing costs for the private sector.
  5.  Lastly, The ECB will fully reinvest the principal payments from maturing securities purchased under the Asset Purchase Programme (APP).

Source: ECB.