MNI: ECB Cuts Deposit Rate, Restarts QE, Amends TLTROs: Text

     LONDON (MNI) - Below is the text release by the European Central Bank's

Governing Council 

     September 12

     Monetary policy decisions 

     At today's meeting the Governing Council of the ECB took the following

monetary policy decisions:

     (1) The interest rate on the deposit facility will be decreased by 10 basis

points to -0.50%. The interest rate on the main refinancing operations and the

rate on the marginal lending facility will remain unchanged at their current

levels of 0.00% and 0.25% respectively. The Governing Council now expects the

key ECB interest rates to remain at their present or lower levels until it has

seen the inflation outlook robustly converge to a level sufficiently close to,

but below, 2% within its projection horizon, and such convergence has been

consistently reflected in underlying inflation dynamics.

     (2) Net purchases will be restarted under the Governing Council's asset

purchase programme (APP) at a monthly pace of E20 billion as from 1 November.

The Governing Council expects them to run for as long as necessary to reinforce

the accommodative impact of its policy rates, and to end shortly before it

starts raising the key ECB interest rates.

     (3) Reinvestments of the principal payments from maturing securities

purchased under the APP will continue, in full, for an extended period of time

past the date when the Governing Council starts raising the key ECB interest

rates, and in any case for as long as necessary to maintain favourable liquidity

conditions and an ample degree of monetary accommodation.

     (4) The modalities of the new series of quarterly targeted longer-term

refinancing operations (TLTRO III) will be changed to preserve favourable bank

lending conditions, ensure the smooth transmission of monetary policy and

further support the accommodative stance of monetary policy. The interest rate

in each operation will now be set at the level of the average rate applied in

the Eurosystem's main refinancing operations over the life of the respective

TLTRO. For banks whose eligible net lending exceeds a benchmark, the rate

applied in TLTRO III operations will be lower, and can be as low as the average

interest rate on the deposit facility prevailing over the life of the operation.

The maturity of the operations will be extended from two to three years.

     (5) In order to support the bank-based transmission of monetary policy, a

two-tier system for reserve remuneration will be introduced, in which part of

banks' holdings of excess liquidity will be exempt from the negative deposit

facility rate.

     Separate press releases with further details of the measures taken by the

Governing Council will be published this afternoon at 15:30 CET.

     The President of the ECB will comment on the considerations underlying

these decisions at a press conference starting at 14:30 CET today.

--MNI London Bureau; tel: +44 203-586-2225; email: les.commons@marketnews.com

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