European Central Bank Increases Emergency Stimulus by €600 Billion

The ECB’s latest funding boost takes the size of its crisis bond-buying programme to a staggering €1.35 trillion.

Following a Thursday meeting of its Governing Council to determine monetary policy decisions, the European Central Bank has announced that it will enlarge its emergency bond-buying programme by €600 billion in a further effort to help European economies weather the damage caused by the COVID-19 pandemic.

The envelope for the pandemic emergency purchase programme (PEPP) will be increased by €600 billion to a total of €1,350 billion,” the ECB wrote in its statement on the meeting.

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.

In further measures, the ECB declared that purchases under the programme will continue until the end of June 2021 at the earliest. Interest rates remain unchanged.

The scale of the move has taken investors by surprise. Ulas Akincilar, INFINOX’s head of trading, described the move as ECB chief Christine Lagarde “firing the Euro bazooka”.

Despite the new stimulus measures, the stock surge that followed had little momentum, and most indexes returned to normalcy ahead of US markets opening on Thursday. The FTSE 100 and DAX were each down by 0.6%, and the CAC 40 by 0.3%.

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