The ECB Eased Yesterday and Stands Ready to Do More If Necessary

The ECB stands ready to do more after increasing QE and restarting the LTRO programme yesterday


The European Central Bank held interest rates unchanged yesterday, with deposit rates at -0.50% and refi rates at 0.0%. But, they added to the QE programme, by 120 billion Euros/month and restarted LTROs. The considerable increase in QE turned the Euro quite bearish and EUR/USD fell around 300 pips yesterday from top to bottom. Today we are hearing ECB members say that yesterday’s action wasn’t all.

ECB’s Visco Commenting

  • There will be more action if needed
  • Widening of spreads makes monetary policy transmission more difficult
  • Adds that the ECB can front load bond purchases if needed as well
  • Thursday decision was not the final word

Comments by ECB governing council member, Pablo Hernandez de Cos

  • ECB still has room to act, not at lower-bound
  • ECB could buy more Italian debt if necessary
  • QE rather than rate cut is the best response to the virus situation
  • But does not rule out rate cuts if situation worsens

They are right in saying that the QE programme works better than lowering interest rates. I mean, if people are isolated and businesses are closed, what good would lower rates do. The higher QE and buying of national debt by the ECB, such as in Italy if it’s needed, can ease some of liquidity pressures, since businesses will have to pay rent and interest on the debt. But then again, it’s only as much financial institutions can do. Only governments can tackle coronavirus, by isolating the population, obviously.

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Skerdian Meta
Lead Analyst
Skerdian Meta Lead Analyst. Skerdian is a professional Forex trader and a market analyst. He has been actively engaged in market analysis for the past 11 years. Before becoming our head analyst, Skerdian served as a trader and market analyst in Saxo Bank's local branch, Aksioner. Skerdian specialized in experimenting with developing models and hands-on trading. Skerdian has a masters degree in finance and investment.

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