No Fireworks from ECB this Time

April 30, 2020

At a scheduled meeting of the European Central Bank Governing Council, officials left key interest rate unchanged (a 0.0% refinancing rate flanked by a -0.5% deposit rate and a 0.25% marginal lending rate). Quantitative stimulus (asset purchases) was not enhanced beyond last month’s parameters. Terms were relaxed on some lending operations, and a new series of non-targeted pandemic longer term refinancing operations was initiated. “The euro area is facing an economic contraction of a magnitude and speed that are unprecedented in peacetime,” according to the released statement, and President Christine Lagarde warned of a possible double-digit GDP contraction this year. More forceful fiscal support would help. The ECB stands ready to amp up its stimulus further if and when deemed appropriate. But all in all by not greatly augmenting its stimulus at today’s scheduled meeting, Euroland monetary policymakers disappointed many analysts, provoking a shift from stocks to fixed income securities.

Copyright 2020, Larry Greenberg. All rights reserved. No secondary distribution without express permission.



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