The ECB Sounds Pessimistic, But Sticking with PEPP - Forex News by FX Leaders

The ECB Sounds Pessimistic, But Sticking with PEPP

Posted Thursday, November 26, 2020 by
Skerdian Meta • 1 min read

The European Central Bank attempted to fight the recession in Q2 of this year with the PEPP programme, which has been working well to be honest. But, that’s only as much as they can do. If fundamentals deteriorate because of politics, they can’t do much more. They sounded worried about the effects of new restrictions, but are sticking with the PEPP for now.

 

The minutes from the ECB October policy meeting

  • It was cautioned that governing council should not pre-commit to specific policy actions
  • Policymakers see possibility that pandemic might have longer-lasting effects
  • That will take a toll on demand side, supply side, reducing growth potential
  • It was stressed that any sign of complacency could be detrimental
  • Full account
The thing to note from this is that policymakers see the flexibility from PEPP was essential to its continued success and that they wanted to wait for a fiscal response before reacting instead. Adding that more bond-buying may not have the same impact now.
In summary, the governing council definitely looks to be favouring the use of PEPP and there really isn’t anything else that hasn’t been said already recently. ECB policymaker, Peter Kazimir said earlier that the ECB will work with tools that have “worked”.
Clearly more hints that rate cuts are off the table for December. This just reaffirms that extending PEPP and enhancing TLTROs are the likeliest options that the governing council will stick with. Not too dovish for the Euro, whcih stands unchanged.
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About the author

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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