At its monetary policy meeting held on July 16th, the Governing Council of the European Central Bank (ECB) decided to leave the interest rates 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, as expected. Additionally, the ECB kept its Pandemic Emergency Purchase Programme (PEPP) steady at €1,350 billion after expanding it by €600 billion in June.
ECB leaves key rates unchanged, PEPP steady at €1,350 billion
EUROPEAN CENTRAL BANK EMERGENCY MEASURES
Following the European Central Bank's (ECB) decision to leave its key rates and the €1,350 billion Pandemic Emergency Purchase Programme (PEPP) unchanged, Christine Lagarde, President of the ECB, is delivering her remarks on the monetary policy outlook in a press conference. Key takeaways: "We have front-loaded PEPP purchases." "Slowed PEPP purchases because markets have been more stable." "Unless there are significant upside surprises we will use the entire PEPP envelope." "Felt we are in a good place at the moment."
Speaking on Sunday, the European Central Bank (ECB) Governing Council member and Bank of France Head Francois Villeroy de Galhau made some comments on the central bank’s monetary policy options to respond to the coronavirus pandemic led economic damage. Key quotes: “The coronavirus pandemic has permanently changed European economic policy. “ On the expansion of ECB policy measures, "The first lesson is that what we presented as exceptional, provisional weapons will be long-lasting."
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JULY MEETING PREVIEW
Lagarde has picked the low-hanging fruit – and now needs her political skills to poke policymakers on the fiscal front – without scaring markets, a fine balancing act. The European Central Bank is set to leave its policy unchanged in its July meeting. The Frankfurt-based institution is set to take a break after topping up its Pandemic Emergency Purchase Program (PEPP) with €600 billion in June. This bond-buying scheme – which has fewer constraints than previous ones – now totals €1.35 trillion.
JUNE MEETING PREVIEW
One-two punch – in favor of the euro. Less than 24 hours have passed since German Chancellor Angela Merkel announced a €130 billion stimulus plan, and in Frankfurt, on the other side of Europe's largest economy, another stimulus boost came. The European Central Bank has announced an increase of €600 billion to its Pandemic Emergency Purchase Program (PEPP), and it now reaches €1.35 trillion.
The European Central Bank brought its bond purchase program limit t €1.3 trillion in an effort to help member states cope with the expense of rebuilding their economies after the coronavirus pandemic. Citing the downward pressure on inflation and the bank stated, “The PEPP expansion will further ease the general monetary policy stance, supporting funding conditions in the real economy, especially for businesses and households.” Interest rate unchanged at 0.0%, deposit at -0.5%.
April MEETING REVIEW
The European Central Bank has had its say – by leaving the bond-buying program unchanged, far from what is needed. The ECB has disappointed investors and the euro may suffer. The Frankfurt-based institution left the PEPP bond-buying scheme unchanged at €750 billion and only said it is ready to increase it and let it run through the year-end. That is insufficient amid the rapid pace of deploying funds and the gravity of the situation, as data has shown.
The European Central Bank kept its main interest rates unchanged -0.0% as widely expected but in a small surprise declined to increase its bond buying program, putting the decision off until at least the June 4 meeting. There had been modest market anticipation that to help eurozone governments with the skyrocketing economic cost of the Coronavirus outbreak the bank would increase the limits of its pandemic emergency purchase program (PEPP).
January meeting review
A wise owl – that is what Christine Lagarde, President of the European Central Bank aspires to be. She said that back in December and has been wearing an owl pin in the January rate decision. Her press conference seems to be wise – if her intention was not to rock the boat. EUR/USD has maintained its narrow range, with implied volatility digging to new lows.
Commission will use all the tools at its disposal to support economy. As the ECB announced its liquidity boosting measures, EU leaders gave the Commission a mandate to further step up the repsonse to the Coronavirus, or Covid-19 outbreak, on all fonts. On the health front the Commission has announced a series of measures and mobilised EUR 140 bln in public and private funding on research for a vaccine.