The expected shift towards a more restrictive monetary policy carried out today by the ECB. Following the meeting of its Board of Directors, it announced the fastest cut of the APP quantitative easing program, which may be completed in the third quarter of the year.
The ECB also assures that it will do what is necessary to achieve the inflation target.
As for Greece, it explicitly reaffirms its intention to continue buying Greek bonds even after the completion of the PEPP pandemic program regardless of the amount of bonds it holds and matures.
Specifically, regarding the Greek government bonds held by the ECB, in the announcement issued a while ago, the Central Bank reaffirms that it will continue to flexibly buy Greek bonds after the end of the PEPP program, regardless of the repayments of the bonds already owns.
And this in order – as he states – not to hinder the transmission of monetary policy to the Greek economy, while it is still recovering from the effects of the pandemic.
Net purchases under PEPP could also be repeated, if necessary, to address the negative shocks associated with the pandemic.
As for the general bond purchase programthe APP, the ECB decided to cut the amount of the bonds it will buy each month for the next few months, targeting the program possibly to end at some point in the third quarter of the year.
Thus, in April, bond purchases through the program will reach 40 billion euros, 30 billion euros in May and 20 billion euros in June. The ECB will, however, continue to reinvest the amount of bonds in its portfolio that are maturing.
Regarding the time of the interest rate increase, the ECB assures that it will be gradual and will start shortly after the completion of the APP program (therefore probably in the fourth quarter of the year).
Finally, on the issue of bank liquidity, the ECB will reassess the situation in June, when the TLTRO III program ends.
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