Full text: ECB statement on May 4, 2023 | Forexlive

Full text of the May 4, 2023 ECB statement:

he inflation outlook continues to be too high for too long. In light
of the ongoing high inflation pressures, the Governing Council today
decided to raise the three key ECB interest rates by 25 basis points.
Overall, the incoming information broadly supports the assessment of the
medium-term inflation outlook that the Governing Council formed at its
previous meeting. Headline inflation has declined over recent months,
but underlying price pressures remain strong. At the same time, the past
rate increases are being transmitted forcefully to euro area financing
and monetary conditions, while the lags and strength of transmission to
the real economy remain uncertain.

The Governing Council’s future
decisions will ensure that the policy rates will be brought to levels
sufficiently restrictive to achieve a timely return of inflation to the
2% medium-term target and will be kept at those levels for as long as
necessary. The Governing Council will continue to follow a
data-dependent approach to determining the appropriate level and
duration of restriction. In particular, the Governing Council’s policy
rate decisions will continue to be based on its assessment of the
inflation outlook in light of the incoming economic and financial data,
the dynamics of underlying inflation, and the strength of monetary
policy transmission.

The key ECB interest rates remain the
Governing Council’s primary tool for setting the monetary policy stance.
In parallel, the Governing Council will keep reducing the Eurosystem’s
asset purchase programme (APP) portfolio at a measured and predictable
pace. In line with these principles, the Governing Council expects to
discontinue the reinvestments under the APP as of July 2023.

Key ECB interest rates

The
Governing Council decided to raise the three key ECB interest rates by
25 basis points. Accordingly, the interest rate on the main refinancing
operations and the interest rates on the marginal lending facility and
the deposit facility will be increased to 3.75%, 4.00% and 3.25%
respectively, with effect from 10 May 2023.

Asset purchase programme (APP) and pandemic emergency purchase programme (PEPP)

The
APP portfolio is declining at a measured and predictable pace, as the
Eurosystem does not reinvest all of the principal payments from maturing
securities. The decline will amount to €15 billion per month on average
until the end of June 2023. The Governing Council expects to
discontinue the reinvestments under the APP as of July 2023.

As
concerns the PEPP, the Governing Council intends to reinvest the
principal payments from maturing securities purchased under the
programme until at least the end of 2024. In any case, the future
roll-off of the PEPP portfolio will be managed to avoid interference
with the appropriate monetary policy stance.

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.

Refinancing operations

As
banks are repaying the amounts borrowed under the targeted longer-term
refinancing operations, the Governing Council will regularly assess how
targeted lending operations are contributing to its monetary policy
stance.

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The Governing Council stands ready to adjust
all of its instruments within its mandate to ensure that inflation
returns to its 2% target over the medium term and to preserve the smooth
functioning of monetary policy transmission. The ECB’s policy toolkit
is fully equipped to provide liquidity support to the euro area
financial system if needed. Moreover, the Transmission Protection
Instrument is available to counter unwarranted, disorderly market
dynamics that pose a serious threat to the transmission of monetary
policy across all euro area countries, thus allowing the Governing
Council to more effectively deliver on its price stability mandate.

The
President of the ECB will comment on the considerations underlying
these decisions at a press conference starting at 14:45 CET today.