European Central Bank Statement comparison — 12 March 2020 vs 4 June 2020
This European Central Bank statement comparison covers 12 March 2020 and 4 June 2020. Overall, the newer document was more dovish. The June 2020 statement represents a further dovish escalation from the March emergency measures, with the ECB significantly increasing and extending its pandemic asset purchases. This signals that the ECB remains in full crisis-fighting mode and is prepared to use all tools to support the economy, with the next decision likely maintaining or expanding accommodation.
What changed
More dovish. The June 2020 statement represents a further dovish escalation from the March emergency measures, with the ECB significantly increasing and extending its pandemic asset purchases. This signals that the ECB remains in full crisis-fighting mode and is prepared to use all tools to support the economy, with the next decision likely maintaining or expanding accommodation.
- Inflation — More dovish. Prior document lacks explicit inflation assessment, while current document cites pandemic-related downward revision to inflation as justification for stimulus expansion, indicating a more accommodative stance.
- Labour Market — Little changed. No labour market signals in either document; no shift.
- Rate Path — More dovish. Prior already dovish with TLTRO cuts and QE increase; current adds larger PEPP envelope, extended horizon, and open-ended conditionality, deepening the accommodative bias.
- Balance Sheet — More dovish. Prior announced €120B APP increase; current significantly expands PEPP by €600B to €1.35T with flexible purchases, signalling substantial balance sheet expansion.
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 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 purchases will continue to be conducted in a flexible manner over time, across asset classes and among jurisdictions.
The envelope for the pandemic emergency purchase programme (PEPP) will be increased by €600 billion to a total of €1,350 billion.
The horizon for net purchases under the PEPP will be extended to at least the end of June 2021.
In any case, the Governing Council will conduct net asset purchases under the PEPP until it judges that the coronavirus crisis phase is over.
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.
In response to the pandemic-related downward revision to inflation over the projection horizon, the PEPP expansion will further ease the general monetary policy stance, supporting funding conditions in the real economy, especially for businesses and households.
Official documents
Background reading
Related
12 March 2020 statement · 4 June 2020 statement · Earlier meeting · Later meeting · Previous comparison · Next comparison · Methodology
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