ECB announced to increase the pandemic emergency purchase programme (PEPP) by EUR 600B to a total of EUR 1350B today. Purchases will continue to conduct in a “flexible manner over time, across asset classes and among jurisdictions”. Also, the horizon of PEPP net purchases will be extended to “at least the end of June 2021”. Additionally, “the Governing Council will conduct net asset purchases under the PEPP until it judges that the coronavirus crisis phase is over.” Maturing principal payments will also be reinvested “until at least the end of 2022”. Asset purchase programme net purchase will continue at a monthly pace of EUR 20B and it’s expected to “run for as long as necessary”. Reinvestments of principal payments will also continue, “for an extended period of time”. Interest rates are held unchanged, with the main refinancing rate at 0.00%, marginal facility rate at 0.25% and the deposit rate at -0.50%. In the post-meeting press conference, ECB President Christine Lagarde said economic data have shown some signs of a “bottoming-out” in the economy, alongside the gradual easing of coronavirus containment measures. But “the improvement has so far been tepid compared with the speed at which the indicators plummeted in the preceding two months.” In the baseline scenario of new economic projections, GDP is expected to fall by -8.7% in 2020 (revised down by -9.5% from March projections), then rebound by 5.2% in 2021 (revised up by 3.9%) and 3.3% in 2022. Balance of risks is to the downside.
