MNI POLICY: ECB Fixes Rates Until H2 2020; TLTRs Refi +10bp

By Luke Heighton

     VILNIUS (MNI) - Key interest rates will remain unchanged until "at least

through the first half of 2020," the European Central Bank announced Thursday,

with the interest rate for TLTRO-III set 10bps above the main refinancing rate.

     The move to keep interest rates at their present level for longer

represents a change in the forward guidance announced in March, when the ECB

said rates would remain on hold "at least through the end of 2019."

     As expected, the Governing Council also set out the precise pricing terms

for the two-year targeted longer-term refinancing operations also announced in

March and due to start in September, with lower rates for banks that exceed

lending targets. "The interest rate in each operation will be set at a level

that is 10 basis points above 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 will be lower and can be as low as the average interest rate on the

deposit facility prevailing over the life of the operation plus 10 basis

points." 

     ECB President Mario Draghi will comment on the considerations underlying

the decisions at a press conference starting at 1430 CET today.

--MNI Frankfurt Bureau; +49-69-720-146; email: luke.heighton@marketnews.com

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