At its Governing Council meeting on 10 March, the European Central Bank decided to alter the parameters of its monetary policy. The main interest rate was lowered to 0.00% (from 0.05%). The marginal lending facility was lowered to 0.25% and the deposit facility interest rate was further lowered from -0.30% to -0.40%. Starting in April, the ECB will buy not €60 bn, but €80 bn a month of assets to boost the economy – the so-called quantitative easing. Moreover, also euro-denominated bonds issued by non-bank corporations with high ratings will be eligible for assets. Banks in the eurozone will be able to get further cheap loans as part of a new Targeted Long-term Refinancing Operations program (TLTRO III), starting in June. The maturity of the loans will be 4 years and banks which use the money to provide loans to their clients will get more favorable conditions. Lowering of the interest rates was seen as largely symbolic by the experts. The expanded QE operation and new program of cheap loans is seen as more important. Cheap energy prices push inflation into red numbers. This year, the ECB expects it at only 0.1% and only 1.3% next year – still well below the nominal target of “below but close to 2%”. Expansionary monetary policy counters the trends, but critics fear it could lead to problems of overheating – for example on the reality market.

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