What changed in the European Central Bank statement — 30 April 2020

European Central Bank held policy at -0.50%. 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.

Decision

Decision: hold
Deposit facility rate: -0.50%

Going into the decision

On the day, the committee read as dovish — -2.4 on a scale where +3 means every member wants higher rates and −3 means every member wants cuts.

Reconstructed from official member remarks published before the decision date. 4 of 27 active members had stored official remarks.

What changed

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.

Previous 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.
rate path: Acknowledges calm conditions but prepares for possible deterioration.

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.
rate path: TLTRO rates cut, incentivizing banks to lend at effectively -0.75% for top performers.

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.
rate path: Significant QE increase to support financing conditions amid COVID-19.

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.
rate path: Rates on hold as expected; no surprise.

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.
rate path: Reiterates low-for-long guidance, signaling no rate hike for extended period.

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.
rate path: Reinvestment commitment extends well beyond first rate hike, ensuring long-term accommodation.

Current wording

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.
rate path: Clear readiness to scale up QE, reflecting downside risks and commitment to action.

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.
rate path: Substantial further easing of TLTRO III terms; effective rate can go as low as -1% for banks meeting lending thresholds.

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.
rate path: New liquidity backstop at negative rates reinforces accommodative stance.

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.
rate path: Continued APP at steady pace alongside PEPP maintains significant QE footprint.

These purchases will continue to be conducted in a flexible manner over time, across asset classes and among jurisdictions.
rate path: Flexibility allows ECB to adjust allocation as needed, key for market expectations.

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.
rate path: Sets minimum duration for PEPP, with open-ended condition on crisis phase.

Official statement

30 April 2020

Monetary policy decisions

At today’s meeting the Governing Council of the ECB took the following monetary policy decisions:

(1) The conditions on the targeted longer-term refinancing operations (TLTRO III) have been further eased. Specifically, 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.

(2) 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. The PELTROs consist of seven additional refinancing operations commencing in May 2020 and maturing in a staggered sequence between July and September 2021 in line with the duration of the collateral easing measures. 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.

(3) Since the end of March, purchases have been conducted under the Governing Council’s new pandemic emergency purchase programme (PEPP), which has an overall envelope of €750 billion, to ease the overall monetary policy stance and to counter the severe risks to the monetary policy transmission mechanism and the outlook for the euro area posed by the coronavirus pandemic. 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.

(4) Moreover, 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. The Governing Council continues to expect monthly net asset purchases under the APP to run for as long as necessary to reinforce the accommodative impact of its policy rates, and to end shortly before it starts raising the key ECB interest rates.

(5) 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.

(6) 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.

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. In any case, it stands ready to adjust all of its instruments, as appropriate, to ensure that inflation moves towards its aim in a sustained manner, in line with its commitment to symmetry.

Further details on the amendments made to the terms of TLTRO III and on the new PELTROs will be published in dedicated press releases this afternoon at 15:30 CET.

The President of the ECB will comment on the considerations underlying these decisions at a press conference starting at 14:30 CET today.

Background reading

Cadence's comparison is generated from the official documents. Read the methodology.