The ECB has held its main rates steady as expected, and not changed the size of the Pandemic Emergency Purchase Programme (or PEPP, its new asset purchase programme) from the previously stated €750bn. However, that is not to say that it did nothing today. Other easing measures have been made and we have been introduced to (yet another) acronym, the PELTRO.
ECB continuing policy:
- Hold rates firm, with the main refinancing rate of 0.0% and the deposit rate of -0.50%. No surprises here
- Continue the Asset Purchases Programme (APP) at €20bn per month.
- Continue its COVID-19 emergency asset purchases, or PEPP asset purchases at €750bn. It is fully prepared to increase the size and adjusted composition of the purchases by as much as necessary and for as long as needed. This is continuing the original announcement on this from 18th March.
However, there are also some changes too. A lowering of the TLTRO rates and a new Pandemic Emergency Longer Term Refinancing Operations (PELTRO).
- TLTRO have been further eased from -25bps under the average rate of the main refi, to -50bps.
- A new PELTRO has been set in order to support liquidity conditions. for the next 12 months. The rate is set at -25 basis points under the average rate on the main refi.
The headlines will say that the ECB kept rates steady, but they have acted to ease monetary conditions further.
The euro has been steady on this announcement, but the ECB is continuing to show that it will act to preserve the euro. We continue to see EUR/USD holding ground in the wake of these decisions and it will be interesting to see if the key near term resistance of $1.0890 can be breached.