BOLD ECB ACTION SETS A HIGHLY SUPPORTIVE MONETARY POLICY STANCE ALSO IN 2021

Highlights:

• At today’s meeting the Governing Council delivered a bold policy package that is broadly in line with expectations.
  Measures include the extension of the PEPP (up by € 500 bn to March 2022), more TLTROs at better conditions and the extension of other tools (collateral rules, PELTROs) adopted in spring. 
• Looking ahead, President Lagarde pointed out that further monetary policy action remains pandemic dependent and that the ECB expects herd immunity to be reached by year-end 2021. She also emphasized the ECB’s ability to act again if needed.
• While no further ECB action seems imminent as of now, today’s action extends the highly supportive monetary policy environment throughout 2021. 
• We view today’s announcements as a positive for credit markets as the ECB again made clear that it will not tolerate fragmentation across countries or sectors.