ECB TURNS INTO EASING MODE AS THE MACRO OUTLOOK BECAME CLOUDED

At today’s Governing Council meeting, the ECB surprised markets by adopting a series of supportive monetary policy measures: Key rates will not be altered at least until year-end 2019 (from “through summer 2019” before), a series of new TLTROs was announced and the fixed-rate full allotment procedure was extended until at least March 2021.

Highlights:

  • The ECB revised its macro outlook significantly down and even continues to see the activity risks on the downside.
  • At today’s meeting the ECB stepped up its forward guidance. It now expects rates to remain at current levels “at least through the end of 2019”.
  • It also announced a series of seven new quarterly TLTROs starting in September with 2Y maturity but as less favourable conditions than for the last TLTROs.
  • Today’s ECB decisions are a moderate positive for equities as well as credits and will dampen the rise in core government bond yields in 2019.

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ECB TURNS INTO EASING MODE AS THE MACRO OUTLOOK BECAME CLOUDED

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