ECB decisions
On February 5, the Governing Council of the European Central Bank (ECB) decided to keep the three key ECB interest rates unchanged. Accordingly, the
interest rates on the deposit facility, the main refinancing operations (MROs) and the marginal lending facility will remain unchanged at 2%, 2.15% and 2.40% respectively
The council’s updated assessment reconfirms that inflation should stabilise at the 2% target in the medium term. The economy remains resilient in a challenging global environment. Low unemployment, solid private sector balance sheets, the gradual rollout of public spending on defence and infrastructure and the supportive effects of the past interest rate cuts are underpinning growth.
At the same time, the outlook is still uncertain, owing particularly to ongoing global trade policy uncertainty and geopolitical tensions.
The council is determined to ensure that inflation stabilises at its 2% target in the medium term. It will follow a data-dependent and meeting-by-meeting approach to determining the appropriate monetary policy stance. In particular, the council’s interest rate decisions will be based on its assessment of the inflation outlook and the risks surrounding it, in light of the incoming economic and financial data, as well as the dynamics of underlying inflation and the strength of monetary policy transmission. The council is not pre-committing to a particular rate path.
The Asset Purchase Programme and Pandemic Emergency Purchase Programme portfolios are declining at a measured and predictable pace, as the Eurosystem no longer reinvests the principal payments from maturing securities.
The Governing Council stands ready to adjust all of its instruments within its mandate to ensure that inflation stabilises at its 2% target in the medium term and to preserve the smooth functioning of monetary policy transmission.
Moreover, the Transmission Protection Instrument is available to counter unwarranted, disorderly market dynamics that pose a serious threat to the transmission of monetary policy across all euro area countries, thus allowing the council to more effectively deliver on its price stability mandate.
ECB monetary operations
On February 2, the ECB announced the seven-day MRO. The operation was conducted on February 3, and attracted bids from euro area eligible counterparties of €9,219.50 million, €3,285 million less than the previous week. The amount was allotted in full at a fixed rate equivalent to the prevailing MRO rate of 2.15%, in accordance with current ECB policy.
On February 4, the ECB conducted a seven-day US dollar funding operation through collateralised lending in conjunction with the US Federal Reserve. This operation attracted bids of $21 million, which were allotted in full at a fixed rate of 3.89%.
Domestic Treasury bill market
In the domestic primary market for Treasury bills, the Treasury invited tenders for 91-day and 273-day bills for settlement value February 5, maturing on May 7 and November 5, respectively.
Bids of €81.12 million were submitted for the 91-day bills, with the Treasury accepting €32.92 million, while bids of €50.43 million were submitted for the 273-day bills, with the Treasury accepting €6.02 million. Since €48.16 million worth of bills matured during the week, the outstanding balance of Treasury bills decreased by €9.22 million, standing at €745.04 million.
The yield from the 91-day bill auction was 2.002%, increasing by 2.40 basis points from bids with a similar tenor issued on January 29, representing a bid price of €99.4965 per €100 nominal. The yield from the 273-day bill auction was 1.981%, decreasing by 1.00 basis point from bids with a similar tenor also issued on January 29, representing a bid price of €98.5200 per €100 nominal.
During the week, secondary market turnover in Malta Government Treasury bills amounted to €550,000 which were executed on the On-exchange market of the Malta Stock Exchange.
On February 9, the Treasury invited tenders for 91-day and 182-day bills maturing on May 14 and August 13, respectively.
The report is prepared by the Monetary Operations and Collateral Management Office of the Central Bank of Malta.
