The ECB is Throwing in the Towel

Posted Wednesday, April 8, 2020 by
Skerdian Meta • 1 min read

The European Central Bank (ECB) was easing the monetary policy in the second half of last year, like all other central banks, as the Eurozone and global economy weakened. But, that’s nothing compared to the monetary easing we have seen in the last month or so, although everyone has panicked and all central banks have opened the tap.

The ECB introduced the PEPP programme a few weeks ago, but it seems like that might not be enough. I mean, how can it be enough, when everyone is staying at home and businesses are closing down.

Comments by ECB policymaker, Martins Kazaks

  • It would be irresponsible if EU countries leave ECB alone in virus fight
  • ECB can expand, extend stimulus scheme if needed
  • Can also increase asset purchase volumes or even look for new instruments
  • Can even consider the use of OMT

Further comments on the day by ECB governing council member Villeroy

  • We will have ‘obligation’ to keep rates low for a long period of time
  • Only major risks would justify more radical ECB tools
  • Inflation to stay very weak for a long time after the crisis

They promise to keep the fight going, extending and expanding the stimulus programme and even considering starting the OMT (Outright Monetary Transactions) programme, which denotes the European Central Bank’s purchases of bonds issued by Eurozone members.

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