In May, the institution reduced its main refinancing rate to 1%, introduced 12-month maturity repos, a debt purchase scheme and announced that the European Investment Bank is to become counterparty in its operations. At the end of June, the ECB pumped in €442.2bn in one-year loans, the largest amount it had ever injected in a signal operation. And although in June and July the benchmark rate remained unchanged, this week the bank began its covered bond purchase program. Under the agenda, the institution is expected to buy €60 billion worth of covered bonds gradually over the next year. The ECB will purchase 8% of the total, and the rest will be done by the 16 euro zone central banks.
Certainly, the European Central Bank has been sluggish in implementing new monetary policy measures. Yet, at Trading Economics we think that its actions have been well justified and accurate. While its main refinancing rate remains above the ones in the United Kingdom and United States, the deposit rate has been kept at 0.25 per cent, which makes money market rates lower in the Euro Area than elsewhere. Moreover, despite resisting quantitative easing, the ECB has provided unlimited liquidity to banks at the main rate, and widened the collateral it accepts. In addition, the idea of bringing the European Investment Bank to play may be very effective as the ECB money may be channeled directly to small and medium sized enterprises.