Discussion about the exit from PEPP would be “premature and too early”, this was the mantra that ECB President repeated over and over in her press conference.
The ECB is playing a very cautious game on its exit from emergency monetary policy decisions in the wake of the COVID pandemic.
After an extremely forgettable April meeting, the Governing Council did a copy and paste job on vast swathes of its policy statement.
Only minor changes were seen as they looked to reconfirm its very accommodative policy stance.
For anyone looking for signs of taper talk, it would appear “there’s nothing to see here”.
If anything the statement was bordering on the dovish as the front-loading of the PEPP program will continue over the coming quarter.
There was some speculation that the language of purchases being made at a “significantly higher pace” would be toned down slightly, but nothing of the sort.
The ECB is certainly erring on the side of caution.
ECB President Lagarde talked about flexibility on the PEPP asset purchases in the coming quarter but was also desperate to avoid taper talk calling it “too early” to talk about longer-term issues.
Furthermore, staff projections still not suggesting that HICP inflation will even hit the 2% target this year, before normalising back around 1.5%.
Even in these extraordinary times, where prices are spiking from emergency loose monetary policy, they do not believe they will hit their inflation target.
DATA: 13:45 *(EU) ECB LEAVES MAIN 7-DAY REFINANCING RATE UNCHANGED AT 0.00%; AS EXPECTED - Leaves Marginal Lending Facility unchanged at 0.25%
- Leaves Deposit Facility Rate unchanged at -0.50% QE Programs: - Maintains Pandemic Bond Buying Fund (PEPP) size at $1.85T program running until at least Mar 2022)
Statement: - Reiterates its very accommodative monetary policy stance- Reiterates that prepared to adjust all of its instruments- Reiterates stance that can re-calibrate PEPP envelope to maintain favorable financing conditions
- Reiterates to buy bonds flexibly according to market conditions- Futures roll-off of PEPP bonds will not harm policy stance QE related topic- Reiterates stance to purchase PEPP bonds at significantly higher pace compared to start of year
- Reiterates that APP QE program to run until short before interest rates rise; pace maintained at €20B/month
- To purchase bonds "flexibly" to avoid tightening of financial conditions- Reiterates stance that does not have to use full PEPP envelope, but can also increase, PEPP flexible regarding time, asset classes and countries
- To reinvest maturing PEPP bonds at least through end 2023 **Reminder: ECB Chief Lagarde post rate decision press conference to begin shortly after 08:30 ET (12:30 GMT) Related ( EUR/USD EUR/GBP EUR/JPY GBP/EUR JPY/EUR BUNDS EUECB EZU BTP OAT ) - Source TradeTheNews.com
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