ECB Feels Less Dovish, But Remains Cautious Ahead
The ECB feels comfortable with the PEPP programme for now
Skerdian Meta•Friday, June 26, 2020•2 min read
The European Central Bank introduced the PEPP programme in March as a response to coronavirus. The initial amount was EUR750 billion but then increased to EUR1.3 billion. The worst seems behind us, as the continent reopens and get back to normal, but caution is advised ahead by the ECB. ECB president Lagarde and member Olly Rehn were commenting on the issue a while ago:
Comments by ECB president, Christine Lagarde
- We probably have passed the lowest point of the crisis
- But cautious about possibility of a second wave of infections
- Economic recovery will be sequential
- Doesn’t want to attach recovery to any of the ‘alphabet soup’ i.e. V, W, Nike (:D)
- The recovery will be a complicated matter, there is a lot of uncertainty
- Savings grew substantially over the past two months
- It will take a while before that translates back into investments, spending
- This crisis is worse than the 2008-09 financial crisi
- Central banks have responded to the crisis in a ‘massive’ way
- The ECB mandate is the same i.e. focus on price stability
- We have to use instruments that provide the most proportionate response
- “We knew we had more to do”, when talking about initial €750 billion PEPP launch
- Needed to ensure that there was sufficient liquidity
- Also needed to make sure that banks could continue lending to the economy
- For once, monetary policy and fiscal policy worked hand in hand
So far, she is just painting a general overview of the impact of the coronavirus outbreak and the economic fallout associated to it over the past few months.
Apart from that, she’s just reaffirming that the economic recovery will take some time and I would argue that means the current set of ECB policies will stay in place until we hear more a more confident outlook by herself or the central bank moving forward.
Comments by ECB governing council member, Olli Rehn
- Recent ECB policy actions were necessary and proportionate
- The danger of deflation has reemerged
- We won’t opt for early withdrawal of policy
- It is better to be safe than sorry in this case
The continuous mention of ‘proportionate’ from ECB policymakers is part of the script to reaffirm that their actions are fitting as opposed to what the German constitutional court adjudged QE to be last month.
Rehn’s other remarks just confirms that PEPP stimulus will be here to stay and may stay on for longer if the economic recovery proves to be more dragged out than anticipated.
- Check out our free forex signals
- Follow the top economic events on FX Leaders economic calendar
- Trade better, discover more Forex Trading Strategies
- Open a FREE Trading Account
ABOUT THE AUTHOR
See More
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.
Related Articles
Comments
Subscribe
Login
Please login to comment
0 Comments
Oldest
Sidebar rates
Related Posts
Save
Join 350 000+ traders receiving Free Trading Signals
Alerts
Rates
Calendar
Signals