ECB: Further stimulus not ruled out yet – UOB

Economist Lee Sue Ann at UOB Group assessed the latest ECB event.

Key Quotes

“The interest rate on the main refinancing operations and the interest rates on the marginal lending facility and the deposit facility were left unchanged at 0.00%, 0.25% and -0.50%, respectively.”

“The ECB will continue its purchases under the pandemic emergency purchase programme (PEPP) with a total envelope of EUR1.350tn.”

“Net purchases under the asset purchase programme (APP) will continue at a monthly pace of €20 billion, together with the purchases under the additional €120 billion temporary envelope until the end of the year.”

“The ECB will also continue to provide ample liquidity through its refinancing operations. In particular, the latest operation in the third series of targeted longer-term refinancing operations (TLTRO III) has registered a very high take-up of funds, supporting bank lending to firms and households.”

“Going forward, how the COVID-19 pandemic evolves will remain important to the economic recovery. The upward trend in new cases is worrying, where numbers have climbed in Spain and France since mid-August. For now, none of the negative developments since June may have been sufficient for the ECB to announce additional monetary stimulus. But the prospect of further loosening of monetary conditions before year-end remains high, and the ECB will be erring heavily on the side of caution, especially if the inflation picture remains weak.”