Summary

 ·       As reflected in the new staff projections, expecting a more protracted weakness of the euro area economy, the persistence of prominent downside risks and muted inflationary pressures with further downgrade of the inflation outlook. (changed)

·       Lowers the interest rate on the deposit facility by 10 basis points to -0.50% – to remain at this or lower levels until witnessing the inflation outlook robustly converge to a level sufficiently close to, but below, 2%, within ECB’s projection horizon (changed)

·       Restarts net purchases under the asset purchase programme (APP) at a monthly pace of €20 billion as from 1 November.  This is expected to run at least through the first half of 2020 and for as long as necessary and to end shortly before raising key ECB interest rates. (changed)

·       Changes the modalities of the new series of quarterly targeted longer-term refinancing operations (TLTRO III) 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. (changed)

·       Introduces a two-tier system for reserve remuneration in which part of banks’ holdings of excess liquidity will be exempt from the negative deposit facility rate. (changed)

·       Overall loans to non-financial corporations continue to be solid, although short-term loans – which are more sensitive to the cycle – show signs of weakness. (changed)

·       Governments with fiscal space should act in an effective and timely manner. Countries where public debt is high, governments need to pursue prudent policies that will create the conditions for automatic stabilisers to operate freely. (changed)

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