In November 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 10.6 million euro. Overall, Latvijas Banka has purchased securities totalling 7 404.5 million euro under the PSPP, including 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 at: https://www.ecb.europa.eu/mopo/implement/omt/html/index.en.html. Securities issued by the Latvian government are purchased by Latvijas Banka and the ECB in the secondary market.
The public sector 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% per year. The expanded APP encompasses four programmes: PSPP, CSPP (corporate sector purchase programme), CBPP3 (covered bond purchase programme) and ABSPP (asset-backed securities purchase programme).
Asset purchases under the expanded APP will continue at the current monthly pace of 30 billion euro until the end of September 2018. If at that time the received data still confirm the medium-term inflation outlook by the Governing Council of the ECB, from September 2018 to the end of December 2018 the monthly pace of the net asset purchases will be reduced to 15 billion euro; after that the net asset purchases will be discontinued.
It has been planned to continue implementing the policy that comprises reinvesting the principal payments from maturing securities purchased under the expanded APP for an extended period of time after the end of the net asset purchases, and in any case for as long as necessary, to maintain both favourable liquidity conditions and an ample degree of monetary policy accommodation.
In its June 2018 meeting in Riga, the ECB's Governing Council decided that the key interest rates on the main refinancing operations, the marginal lending facility and the deposit facility would remain unchanged at 0.00%, 0.25% and –0.40% respectively. The Governing Council expects the key ECB interest rates to remain at present levels at least by the summer 2019, and in any case for as long as necessary to ensure further development of inflation levels consistent with the current sustained adjustment expectations in the path of inflation.
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 the 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.