Annalisa Piazza (MFS) | ECB “recalibrates policy”: Nothing else has changed. Indeed, the rest of the policy announcement was a carbon copy of what we heard back in July. Forward guidance on both rates and QE was confirmed, along with the re-investment programmes. The slower pace of PEPP had been widely flagged by ECB officials over the past few weeks so the announcement was hardly a surprise. That said, the…
This Thursday could be a key moment for Europe, with the ECB meeting and the beginning of the European council. We could get a positive surprise on the time extension of PEPP, but the constraints on the “top-up” are significant. There is some tentative progress on the “rule of law” spat but hurdles abound. The Council meeting could bring about the denouement of the Brexit saga.
Lagarde couldn’t have been clearer that risks are now tilted to the downside and that the economic recovery was losing momentum. Given today’s meeting, we expect an expansion of PEPP and further policy measures clearly now cannot be ruled out.
Olivia Álvarez (Monex Europe) | The ECB delivers on market expectations and steps up the total amount of quantitative easing under PEPP purchases by €600 billion. The rise outperformed the consensus call by at least some €100 billion, bringing along a stronger-than-expected market reaction. The program firepower, worth €1.35 trillion now, is set to channel the main recovery mechanism by the ECB, which is vocally reinforcing its accommodative stance amid the current recession environment.
BofA Global Research | We cut our Euro area GDP forecast to -8.3% this year and +4.6% next. The recovery will be weak, permanent income losses big. Fiscal stimulus is not enough to boost consumers and capex. Deficits will still be very big, c 17% cumulatively in 2020/21. The Franco-German initiative helps sentiment earlier than growth. ECB help will remain crucial. PEPP has to double, at least.
Konstantin Veit, PIMCO, Senior Portfolio Manager European Rates Desk | The ECB meets on Thursday, and while we believe the Governing Council will strongly reiterate its readiness to do whatever it takes we don’t think any far reaching monetary policy decision will be taken at the April meeting. There is a chance for the ECB to clarify the treatment of “fallen angels” within the various asset purchase programs, whereby we expect grandfathering in line with the recent changes to the collateral eligibility framework to make head against pro-cyclicality.