ECB Leaves Rates, Asset Purchases Unchanged; Tweaks Lending Ops

imageForex11 hours ago (Apr 30, 2020 07:54AM ET)

(C) Reuters.

By Geoffrey Smith — The European Central Bank kept its monetary policy stance largely unchanged on Thursday, leaving both its official interest rates and its various asset purchase schemes untouched.

It did, however, ease the conditions of its long-term refinancing operations for banks even further. Specifically, it cut the cost of its so-called TLTRO operations to 0.5% percentage point below the official refinancing rate for a 12-month period starting in June. That rate is dependent on banks meeting certain conditions regarding their lending to the real economy.

The ECB also announced a series of seven new funding operations, to be titled PELTROs, to take place from May. Maturities will be staggered between June and September 2021.

It also held out the prospect of adding to its bond purchases in the future, if need be.

“The Governing Council is fully prepared to increase the size of the PEPP and adjust its composition, by as much as necessary and for as long as needed,” the ECB said. The Pandemic Emergency Purchase Program, announced in March, has an overall size of 750 billion euros ($815 billion).

The decisions, which are less radical than some in the market had hoped, come on the same day that new data showed the eurozone economy shrunk by 3.8% in the first three months of the year from the final quarter of 2019.

As that number isn’t annualized, that represents a much sharper decline than the 4.8% drop in U.S. GDP announced on Wednesday. However, it also reflects the fact that European economies went into lockdown earlier than the U.S.

ECB President Christine Lagarde will elaborate further on the decisions at her press conference, which starts at 8:30 AM ET (1230 GMT).

The euro was largely unchanged on the news, but sovereign yield spreads within the euro zone widened on disappointment that it had not expanded the PEPP program.

ECB Leaves Rates, Asset Purchases Unchanged; Tweaks Lending Ops

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