The European Central Bank expanded and extended its asset-buying program Thursday, and announced a new round of cheap loans for banks, vowing to keep an eye on the euro exchange rate as it attempts to shore up the pandemic-hit eurozone economy.
The moves were largely as expected.
“The monetary policy measures taken today will contribute to preserving favorable financing conditions over the pandemic period, thereby supporting the flow of credit to all sectors of the economy, underpinning economic activity and safeguarding medium-term price stability,” the ECB said in a statement following a meeting of its policy-setting Governing Council.
ECB President Christine Lagarde will hold a news conference at 2:30 p.m. Frankfurt time, or 8:30 a.m. Eastern.
Among the highlights of the ECB’s action, the central bank said it would expand the size of its pandemic emergency purchase program by 500 billion euros ($606.2 billion) to 1.85 trillion euros and extending it by at least nine months to March 2022.
“While the main policy changes announced today were largely as expected, they underline the ECB’s commitment to using its balance sheet well beyond the end of the health emergency in order to keep bond yields exceptionally low,” said Andrew Kenningham, chief Europe economist at Capital Economics, in a note.
The ECB said it would continue “to monitor developments in the exchange rate with regard to their possible implications for the medium-term inflation outlook.”
The euro
EURUSD,
+0.33%,
however, was on the rise, up 0.3% at $1.2116 versus the U.S. dollar.
“Ms. Lagarde may try to reinforce this message in the press conference, but we doubt that it will succeed in reversing a gradual upward trend in the exchange rate,” Kenningham wrote.
The ECB also announced a new program of cheap loans to eurozone banks and eased and extended terms of an existing program.
