La ECB does not disappoint and enhances the bazooka even more than the markets had anticipated. At stake is not quantitative easing (re) started in September, but the Pepp, i.e. the securities purchase plan launched in March to counter the coronavirus effect. The initial endowment was 750 billion, but the Eurotower has already spent about a third of this amount and so today Christine Lagarde - number one of the European Central Bank - announced that at least another 600 billion (against the 500 expected by the market). In all, therefore, the operation bill rises to 1.350 billion.
But that's not all: the strengthening of financial strength is accompanied by a time extension, because the Pepp deadline has been extended by six months, from 31 December 2020 as at 30 June 2021. Of course, this is a minimum duration, and – if necessary – nothing will prevent Frankfurt from further extending the duration of the intervention.
The ECB also specified that - once they have reached maturity - the bonds purchased under the PEPP they will be renewed at least until the end of 2022.
In official announcement, the institute explains that the objective of the plan is "to improve the financing conditions for the real economy and in particular for businesses and households".
For interest rates, some analysts had expected further filings, but were disappointed: the Central Bank confirmed the reference rate at zero and -0,50%, that on marginal refinancing operations at 0,25% and that on safe deposits of the ECB itself.
The Governing Council once again says it is "ready to adjust all its tools, as appropriate, to ensure that inflation moves quickly towards its target, in line with its commitment to ensure a symmetrical policy".
In the press conference following the meeting, Lagarde he stressed that the data released in recent weeks “confirm that the euro area is witnessing an unprecedented economic contraction, with heavy job and income losses that led to significant falls in consumption and investment spending. There have been "some signs of recovery, but so far the improvement is tepid" and expectations on the economy are surrounded by an "extraordinary" level of uncertainty. The start of the rebound is expected in the third quarter.
As for the last ones news from Brussels, Lagarde assures that the ECB welcomes with an "energetic welcome" the European Commission's Recovery Fund proposal, warning that after the anti-crisis measures taken "it is urgent to make further efforts to support the recovery".
Finally, the number one of the central bank said that today the Governing Council "did not discuss" the possibility of extending its plans to purchase securities to issues with ratings below the investment grade level (junk bonds, junk titles): “However – he concluded – we will continue to monitor the situation and will adopt all the appropriate measures”.
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