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ECB QE Monitor - June 2020

 

Key points for this month:

  • ECB strengthened its intention to make its action long-term:
    • The ECB revised its medium-term inflation target substantially on the downside. Core inflation is forecast to reach only 0.9% in 2022 (0.8% in 2020, 0.7% in 2021).
    • The ECB justified the adjustment of the size of the PEPP by the revision of its inflation outlook.The ECB increased the size of the PEPP by €600bn to 1,350bn and extended the program at least until the end of June 2021.
    • The Governing Council decided to reinvest maturing securities under the PEPP at least until the end of 2022.  
  • The ECB approach is very flexible. The ECB reduces its purchases in a risk-on environment. Purchasing volume last week was at its lowest level since the introduction of the PEPP (30.5 billion euros; PEPP: 20.2 billion euros and PSPP: 10.3 billion euros). 
  • The deviations from the capital key allocation remain limited if account is taken of purchases made under both the PEPP and APP.

Publication

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  •  APP purchases in June were in line with previous months
    • In June, ECB net asset purchases reached €38.8bn under APP.
    • In June APP by programme: PSPP (€29.8bn; 76.7% of total), CSPP (€7.5bn; 19.4%), CBPP3 (€1.7bn; 4.5%) and ABSPP (€-0.2bn; -0.6%).
    • Deviation of PSPP purchases from capital key proportions was in favor of France and Spain against Germany, Italy.
  • ECB announced record €1.3 trillion uptake of TLTRO program to boost lending to real economy and to favor carry trade operations. This June TLTRO added net €550bn of liquidity, on top of €400bn already injected since March through weekly LTROs.
BELLAÏCHE Mickael , Fixed Income Strategist
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ECB QE Monitor - June 2020
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