RBS.L Share News (RBS)

(Sharecast News) - The European Central Bank kept the door open to ramping up its emergency bond purchase programme, all its policy tools in fact.
The European Central Bank kept the door open to ramping up its emergency bond purchase programme, all its policy tools in fact.

In very explicit terms, in her post-meeting press conference, ECB chief, Christine Lagarde, said the monetary authority was "fully prepared" to increase the size of its €750bn pandemic emergency purchase programme.

Linked to the above, she pointed out that the Eurozone economy might shrink by between 5% and 12% in 2020, followed by a recovery during the following year, with the success of the Covid-19 lockdowns likely the determining factor of the depth of the crisis.

Nevertheless, Lagarde also stressed several times that PEPP was not the only tool available and to highlight the overall size of the central bank's policy arsenal.

Key as well, Lagarde said that the ECB's governing council stood ready to use and modify all tools available as needed to ensure that its monetary policy reached all sectors and all countries as intended "from east to west, to north to south".

ECB policymakers were determined to use full flexibility as needed and would tolerate no so-called 'fragmentation' risks, she added.

The latter was very likely a direct reference to Italy and Spain, and other euro area periphery government debt in particular, given the especially big hit to their economies form the pandemic.

Commenting on the ECB's policy statement, Marchel Alexandrovich, Senior European Economist at Jefferies, told clients: "As expected, after announcing a number of easing measures since the last press conference on 12 March, the ECB takes a pause and holds policy mostly steady today.

"It improves terms of the TLTRO-III operations and introduces a new PELTRO operation to ease liquidity provisions. But it keeps the QE size unchanged, with that decision now likely in June."

-- More to follow --