European Central Bank Statement comparison — 12 March 2020 vs 30 April 2020
This European Central Bank statement comparison covers 12 March 2020 and 30 April 2020. Overall, the newer document was more dovish. The ECB delivered a clear dovish shift by expanding its QE toolkit (PEPP, PELTROs) and easing TLTRO terms further, responding to deepening COVID-19 risks. This signals a willingness to do more if needed, with the next decision likely to involve further easing should conditions deteriorate.
What changed
More dovish. The ECB delivered a clear dovish shift by expanding its QE toolkit (PEPP, PELTROs) and easing TLTRO terms further, responding to deepening COVID-19 risks. This signals a willingness to do more if needed, with the next decision likely to involve further easing should conditions deteriorate.
- Inflation — Little changed. No direct inflation assessment in key passages; rhetoric unchanged between documents.
- Labour Market — Little changed. No direct labour market assessment in key passages; rhetoric unchanged between documents.
- Rate Path — More dovish. The Governing Council intensified easing by cutting TLTRO III rates further and introducing new PELTROs, while maintaining low-for-long guidance and a readiness to scale up PEPP.
- Balance Sheet — More dovish. Significant expansion of QE tools beyond prior APP envelope, including new PEPP program with flexible and open-ended commitment, signalling stronger balance sheet accommodation.
Key wording
Although the Governing Council does not see material signs of strains in money markets or liquidity shortages in the banking system, these operations will provide an effective backstop in case of need.
the interest rate on these TLTRO III operations will be 25 basis points below the average rate applied in the Eurosystem’s main refinancing operations. For counterparties that maintain their levels of credit provision, the rate applied in these operations will be lower, and, over the period ending in June 2021, can be as low as 25 basis points below the average interest rate on the deposit facility.
A temporary envelope of additional net asset purchases of €120 billion will be added until the end of the year, ensuring a strong contribution from the private sector purchase programmes.
The interest rate on the main refinancing operations and the interest rates on the marginal lending facility and the deposit facility will remain unchanged at 0.00%, 0.25% and -0.50% respectively.
The Governing Council expects the key ECB interest rates to remain at their present or lower levels until it has seen the inflation outlook robustly converge to a level sufficiently close to, but below, 2% within its projection horizon, and such convergence has been consistently reflected in underlying inflation dynamics.
Reinvestments of the principal payments from maturing securities purchased under the APP will continue, in full, for an extended period of time past the date when the Governing Council starts raising the key ECB interest rates, and in any case for as long as necessary to maintain favourable liquidity conditions and an ample degree of monetary accommodation.
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 Governing Council decided to reduce the interest rate on TLTRO III operations during the period from June 2020 to June 2021 to 50 basis points below the average interest rate on the Eurosystem’s main refinancing operations prevailing over the same period. Moreover, for counterparties whose eligible net lending reaches the lending performance threshold, the interest rate over the period from June 2020 to June 2021 will now be 50 basis points below the average deposit facility rate prevailing over the same period.
A new series of non-targeted pandemic emergency longer-term refinancing operations (PELTROs) will be conducted to support liquidity conditions in the euro area financial system and contribute to preserving the smooth functioning of money markets by providing an effective liquidity backstop. They will be carried out as fixed rate tender procedures with full allotment, with an interest rate that is 25 basis points below the average rate on the main refinancing operations prevailing over the life of each PELTRO.
net purchases under the asset purchase programme (APP) will continue at a monthly pace of €20 billion, together with the purchases under the additional €120 billion temporary envelope until the end of the year.
These purchases will continue to be conducted in a flexible manner over time, across asset classes and among jurisdictions.
The Governing Council will conduct net asset purchases under the PEPP until it judges that the coronavirus crisis phase is over, but in any case until the end of this year.
Official documents
Background reading
Related
12 March 2020 statement · 30 April 2020 statement · Earlier meeting · Later meeting · Previous comparison · Next comparison · Methodology
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