President of the European Central Bank (ECB) Christine Lagarde.
FRANCISCO SECO | AFP | Getty Images
LONDON – The European Central Bank kept interest rates unchanged on Thursday as eurozone countries continue to struggle with rising Covid-19 infections and subsequent closures.
The ECB’s main refinancing operations, marginal lending facility and deposit facility will remain at 0.00%, 0.25% and -0.50% respectively, according to a statement.
The ECB launched its massive stimulus program in December to support economic recovery in the region. The Pandemic Emergency Purchase Program (PEPP) has been extended to March 2022 with a total of 1.85 trillion euros ($ 2.25 trillion) in mortgage purchases. It enables eurozone governments to get cheaper rates when they borrow on public markets.
However, there are doubts about the way the euro area will cope this year, after a 7.3% drop in GDP (gross domestic product) last year, according to ECB forecasts.
The new year began with stricter social restrictions and national closures in many of the 19 countries that have the currency. Germany, for example, this week extended a national exclusion to 14 February. The Netherlands has announced that there will be a curfew rule next week. And France chose earlier this month to bolster the evening clock, while Portugal closes from Friday.
According to the European Center for Disease Prevention and Control, there have been more than 16 million Covid-19 infections in the EU and more than 400,000 deaths so far.
However, European leaders hope to speed up vaccinations in the coming months as a way to limit the spread of the virus and its economic impact. The European Commission, the EU’s executive, has asked member states to vaccinate at least 70% of their adult population by summer.
Despite the difficult situation, the ECB is sticking to its growth forecasts for this year. Central Bank President Christine Lagarde said at an event earlier this month: “I think our last projections in December are still very plausible.” In December, the bank estimated a GDP rate of 3.9% for 2021 and 2.1% for 2022.