ECB keeps stimulus unchanged but hints at December action

© Reuters. FILE PHOTO: A euro logo sculpture stands in front the headquarters of the European Central Bank in Frankfurt

FRANKFURT (Reuters) – The European Central Bank left its ultra-easy policy unchanged on Thursday but hinted at more support in December for a euro zone economy struggling with a fresh wave of the coronavirus pandemic.

“The Governing Council will recalibrate its instruments, as appropriate, to respond to the unfolding situation and to ensure that financing conditions remain favourable to support the economic recovery and counteract the negative impact of the pandemic on the projected inflation path,” the ECB said in a statement.

But the ECB otherwise left unchanged the parameters of its hallmark Pandemic Emergency Purchase Programme.

Having already extended its copious stimulus until next June, the ECB is buying record amounts of debt, leaving policymakers time to devise their next move and keep pressure on governments to use their budget levers to help the economy.

But new restrictions aimed at curbing the spread of the coronavirus are weighing on the 19-country euro zone’s economy, raising fears that it could slip back into recession as large parts of the services sector are shut down again.

That leaves the ECB with little choice but to extend and expand its 1.35 trillion euro Pandemic Emergency Purchase Programme (PEPP), a move that is likely to come at the bank’s next meeting on Dec. 10.

“In the current environment of risks clearly tilted to the downside, the Governing Council will carefully assess the incoming information, including the dynamics of the pandemic, prospects for a rollout of vaccines and developments in the exchange rate,” the ECB said.

Addressing the rapid deterioration of the outlook is likely to be the focus of ECB President Christine Lagarde’s 1330 GMT news conference and economists expect her to provide clear hints that more stimulus is coming.

With Thursday’s decision, the ECB also remains on track to buy another several hundred billion euros worth of bonds through other asset purchase schemes. It kept its deposit rate unchanged at a record-low minus 0.5% while the main refinancing rate remains at zero.


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