ECB: Interest Rates Remain Unchanged; PEPP to Be Discontinued by the End of 2024

14 December 2023

By Isabel Teles – FRANKFURT (Econostream) – The European Central Bank Governing Council on Thursday decided once again to keep its three key interest rates unchanged, a decision that had been anticipated by markets, and to discontinue reinvestments under the Pandemic Emergency Purchase Programme (PEPP) by the end of next year.

In a statement published on its website, the ECB said that key ECB interest rates remained the primary tool for setting the monetary policy stance, and left the interest rate on the main refinancing operations and the rates on the marginal lending facility and the deposit facility at 4.50%, 4.75% and 4.00% respectively.

The statement said that ‘past interest rate increases continue to be transmitted forcefully to the economy’ and that the Eurosystem’s staff predictions showed growth increasing from 0.6% this year to 0.8% in 2024 and then 1.5% in both 2025 and 2026.

‘According to the latest Eurosystem staff projections for the euro area, inflation is expected to decline gradually over the course of next year, before approaching the Governing Council’s 2% target in 2025’, the ECB said.

Regarding the reinvestments under the PEPP, the ECB said that it would continue to make these in full until the middle of next year.

‘Over the second half of the year, it intends to reduce the PEPP portfolio by €7.5 billion per month on average', the ECB said. 'The Governing Council intends to discontinue reinvestments under the PEPP at the end of 2024.’

‘The Governing Council will continue applying flexibility in reinvesting redemptions coming due in the PEPP portfolio, with a view to countering risks to the monetary policy transmission mechanism related to the pandemic’, the ECB said.