ECB: Further stimulus stays on the table – UOB

Economist at UOB Group Lee Sue Ann assessed the latest ECB event (Thursday).

Key Quotes

“It added a further EUR600bn to its EUR750bn COVID-19 rescue plan, bringing the total stimulus package to an astonishing EUR1.35tn. Markets were largely pricing in a EUR500bn increase to the ECB's so-called Pandemic Emergency Purchase Programme (PEPP).”

“The ECB noted that purchases will be conducted through to “at least June 2021” compared to previous guidance they would be conducted “until the end of 2020” or until the Governing Council “judges that the coronavirus phase is over” with the latter guidance being retained today.”

“The ECB also guided that maturing principal payments under the PEPP will be reinvested until “at least the end of 2022”.

“Asset Purchase Programme (APP) purchases will also continue at a monthly pace of EUR20bn together with the purchases under the additional EUR120bn temporary envelope until the end of the year.”

“Reinvestments of the principal payments from maturing securities purchased under the APP will continue, in full, for an extended period of time past the date when the Governing Council starts raising the key ECB interest rates, and in any case for as long as necessary to maintain favourable liquidity conditions and an ample degree of monetary accommodation.”

“Finally, the ECB decided to keep the interest rate on the main refinancing operations and the interest rates on the marginal lending facility and the deposit facility unchanged at 0.00%, 0.25% and -0.50% respectively.”

“In all, the ECB has once again made an aggressive move. Whilst we are not excluding the possibility of further monetary stimulus down the road, the latest measures announced by the ECB should dent any talks or concerns (for now) about whether or not the ECB is willing to play its role of lender of last resort for the Eurozone.”