European Central Bank keeps interest rates stable, cuts asset purchase

By Aysu Bicer

ANKARA (AA) - The European Central Bank on Thursday kept interest rates unchanged and confirmed it will end the pandemic emergency purchase program by the end of March.

Yet it said, "net purchases under the pandemic emergency purchase program could also be resumed, if necessary, to counter negative shocks related to the pandemic."

Interest rates on main refinancing operations, marginal lending and the deposit facility were 0.00%, 0.25%, 0.50%, respectively.

Eurozone inflation saw a record high of 4.9% in November, with concerns over the new omicron variant of coronavirus rising across the continent.

"Monetary accommodation is still needed for inflation to stabilise at the 2% inflation target over the medium term," the bank said.

In line with a step-by-step reduction in asset purchases, the bank decided on a monthly net purchase pace of €40 billion ($45.3 billion) in the second quarter and €30 billion in the third quarter under the asset purchase program.

The European Central Bank has held a more dovish tone so far compared to other major central banks such as the Bank of England and the US Federal Reserve, having employed an unprecedentedly expansionary monetary policy to back up the eurozone economy amid the COVID-19 pandemic.

Meanwhile, the Bank of England on Thursday increased interest rates 0.15 percentage points to 0.25% for the first time in more than three years, the bank said in a statement.

The US Federal Reserve on Wednesday removed the word "transitory" from describing inflation, and indicated it will end tapering, the process of reducing monthly asset purchases, earlier and faster than previously planned.