Published: 13.02.2018

In January 2018, implementing the public sector purchase programme (PSPP), Latvijas Banka purchased securities issued by the Latvian government and international organisations located in the euro area amounting to 80.5 million euro. Overall, Latvijas Banka has purchased securities totaling 6 800.5 million euro under the PSPP, including securities in the amount of 1 808.4 million euro in 2015, 2 548.9 million euro in 2016 and 2 362.7 million euro in 2017.

The amount of the securities bought by Latvijas Banka is reflected in its monthly balance sheet, while information on the execution of the expanded asset purchase programme (APP) in the Eurosystem as a whole is available on the ECB's website. Securities issued by the Latvian government are purchased by Latvijas Banka and the ECB in the secondary market.

The securities purchase programme was launched in March 2015 pursuing the Eurosystem's (comprising the ECB and national central banks of the euro area) objective of keeping medium-term inflation rates below, but close to, 2%. The expanded APP encompasses four programmes: the PSPP, CSPP (corporate sector purchase programme), CBPP3 (the covered bond purchase programme) and ABSPP (the asset-backed securities purchase programme). 

The duration of the expanded APP is to the end of September 2018 or until the ECB sees a sustained adjustment of the inflation level towards the price stability objective. The target amount of monthly securities purchases under the expanded APP is 60 billion euro, but from April 2017 – 80 billion euro. The target amount of monthly securities purchases under the expanded APP is 60 billion euro (80 billion euro till April) until the end of December 2017 and 30 billion euro from January 2018 to the end of September 2018.

As a result of the expanded APP, the Eurosystem will exchange the less liquid assets (securities) available in the financial market for the highly liquid funds. This intervention is expected to affect the euro area economy through the monetary transmission mechanism. The intervention will improve confidence indicators of the euro area, cut interest rates, enhance lending recovery, stimulate aggregate demand and production capacity utilisation, leading to increased economic growth and a rise in inflation. 

Taking into account the place of PSPP securities storage, the Eurosystem can offer various lending possibilities of PSPP securities. The automatic securities lending programme  (ASL) and strategic securities lending programme (ASLplus) are provided for the Latvian government securities deposited with the international central securities depository Clearstream Banking Luxembourg.

The Governing Council of the ECB, which is the main decision-making body of the ECB, takes monetary policy decisions of the Eurosystem. It consists of the six members of the Executive Board and the governors of the national central banks (including Latvijas Banka) of the 19 euro area countries. The Governing Council of the ECB takes the decisions necessary for the functioning of the Eurosystem and formulates monetary policy for the euro area. This includes setting monetary objectives and key interest rates, as well as the supply of reserves of the Eurosystem.