ECB: No Appetite for More Stimulus, but Forced to Leave Door Open - Rabobank

ECB: No Appetite for More Stimulus, but Forced to Leave Door Open - Rabobank

According to analysts from Rabobank, the European Central Bank showed confidence in its policy measures and the Governing Council has no strong appetite to ramp up policy in the foreseeable future.

Key Quotes:

“Broadly speaking, then, the key message of today’s press conference was that the ECB still has confidence in its policy measures, but with an undertone in that message that was actually not that forceful. This also explains why, talking about the future policy stance, the ECB President repeated that, if needed, the Governing Council will use all instruments within its mandate to support the return of inflation towards its objective and it will continue to monitor that outlook closely.”

“Altogether, we believe that today’s press conference backs our view that the Governing Council has no strong appetite to ramp up policy in the foreseeable future. But it also recognizes that it cannot afford to close to door on possible further easing measures beyond that horizon.”

“As mentioned above, the GC did not set a monthly target for corporate bond purchases. The ECB has probably done this to retain sufficient flexibility to buy more/less corporate debt depending on the circumstances. Interestingly, though, the ECB did set a very high issue limit: up to 70% of the outstanding amount per ISIN can be purchased. This limit can be lower in some circumstances, e.g. for securities issued by public undertakings (i.e. entities in the quasi-government sector).”

“Our key takeaway from these modalities is that the ECB has tried to cast the net as wide as possible, also in view of possible scarcity issues that it may encounter. Moreover, given that the private sector is less prone to ‘monetary financing’ concerns than the public sector, this has also allowed the ECB to do so.”