The European Central Bank did not, as expected, make any changes on Thursday to flat rates or the bond-buying program after stepping up its incentive efforts last month, but admitted that he might not use the full arsenal of buying assets unless there seems to be a need.
“If favorable financing conditions can be maintained with asset purchase streams that do not put the envelope beyond the PEPP’s net purchase horizon, the envelope does not have to be fully utilized,” the ECB said, noting. reference to the pandemic emergency buy 1.85 trillion euros. program, which he said will run through “at least the end of March 2022” after being expanded last month.
The ECB said the envelope can be “rebalanced if necessary to maintain favorable funding conditions to help counteract the adverse effects of the inflation path. “
“This is the first time that we have seen a specific reference, in the official consultation announcing policy changes, to the idea that the PEPP may not be fully utilized,” said Claus Vistesen, chief economist for the euro at Pantheon Macroeconomics, in note.
Vistesen described the additional language as “a small hawkish tilt in the communication, and also one that could be a target for markets.
“After all, the ECB now says that if yields remain as low as they are now, there is no reason to use PEPP in full. We would not pass it on to markets to test the central bank on this, ”he said, while noting that the situation is balanced by the expectation that the ECB could further increase the size of the program. encouragement if conditions warrant.
Others argued that the additional language was in line with what ECB officials have pointed out, and should not come as much of a surprise:
ECB President Christine Lagarde was ready to hold a press conference at 2:30 pm Frankfurt, or 8:30 am East.
The euro EURUSD,
higher against the dollar after the statement and ahead of the press conference, up 0.5% at $ 1.2161.