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The ECB takes out the artillery and launches a 750,000 million asset purchase program

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The European Central Bank (ECB) He has pulled out the artillery after criticism of his inaction at his meeting last week. The monetary body has launched a new € 750 billion asset purchase program to try to ease financial tensions in the eurozone. The new program has been named Pandemic Emergency Purchase Program (PEPP), a Pandemic Emergency Purchase Program.

The ECB has decided to launch "a new temporary asset purchase program for public and private sector securities to counter serious risks for the transmission mechanism of monetary policy and the prospects for the euro area posed by the outbreak and the increasing spread of the coronavirus, Covid-19 ".

This new program will have a total strength of 750,000 million euros. Purchases will take place until the end of 2020 and they will include all the categories of assets eligible under the existing asset purchase program (APP), so that the agency will be able to buy some 75,000 million monthly.

Purchases will be distributed among all territories and will be carried out flexibly. Further, an exemption from the eligibility requirements will be granted for securities issued by the Greek government. "The Governing Council will end these purchases once it judges that the crisis phase of the Covid-19 coronavirus has ended, but in any case not before the end of the year", has detailed the organism.

On the other hand, it has expanded the range of eligible assets under the corporate sector purchasing program (CSPP) to non-financial commercial papers, making all commercial papers of sufficient credit quality eligible for purchase.

Finally, the entity has highlighted that "the Governing Council of the ECB commits to play its role of supporting all citizens of the euro area at this extremely challenging time. To that end, the ECB will ensure that all sectors of the economy can benefit from favorable financial conditions that allow them to absorb this shock. This applies equally to families, companies, banks and governments. "

Thus, he added that "will do everything necessary within its mandate and that "he is fully prepared to increase the size of your asset purchase programs and adjust their composition, as much as necessary and for as long as necessary "and that" will explore all options and all contingencies to support the economy through this shock. "

In this sense, it has confirmed that "to the extent that some self-imposed limits may hinder actions that the ECB must take to fulfill its mandate, the Governing Council will consider reviewing them to the extent necessary so that its action is proportional to the risks we face. The ECB will not tolerate any risk for the smooth transmission of its monetary policy in all jurisdictions of the euro area. "

Parallel to the meeting, the French Minister of Finance, Bruno Le Maire, had ensured that the issuing institute should use all its available instruments "quickly and massively".

AN INSUFFICIENT FIRST ANSWER

Last week the ECB He decided keep interest rates unchanged in response to the impact of the coronavirus, although it decided to approve nnew liquidity auctions with advantageous conditions, improved for the second time the conditions of the third program of long-term financing operations with specific objective (TLTRO-III) and announced that it would buy assets for 120,000 million euros until the end of the year.

However, the impact of the package was blurred after the organisation's president, Christine Lagarde, assured at the press conference after the monetary policy meeting that it was not the work of the ECB reduce country risk premiums, something that has been widely criticized by the financial community.

The ECB has stressed this morning that is ready to adjust all your measurements in the most appropriate way if necessary due to the spread of the coronavirus epidemic and which has the unanimous support of the members of the institution's Governing Council to intervene with the aim of safeguarding the transmission of its monetary policy in all countries, after that the Statements by the Governor of the Austrian Central Bank have questioned the position and capacity of the institution.

UNUSUAL NOTICE

In a unusual statement, the ECB has thus emerged in step with the statements of Robert Holzmann, Governor of the Austrian Central Bank and one of the 'hawks' within the Governing Council of the issuing institute of the euro zone, who, in an interview with the newspaper 'Der Standard', has hinted that the central bank's monetary policy has reached its limits and cannot solve the current crisis, even at the cost of not living up to market expectations.

In the interview, the Austrian banker has pointed out that "Lagarde said that monetary policy had reached its limits. We cannot solve the problem ourselves, first of all it is a matter of fiscal policy. It is the responsibility of the states (…) When the markets understood that Lagarde was serious and that there was unanimity in the Governing Council, they understood that we could not keep inflated prices in the bags"

"The Governing Council was unanimous in its analysis that, in addition to the measures decided on March 12, the ECB will continue to closely monitor the consequences for the economy of the spread of the coronavirus and that the ECB is still ready to adjust all its measures, as appropriate, if necessary to safeguard liquidity conditions in the banking system and ensure the smooth transmission of its monetary policy in all jurisdictions, "the ECB has stated in response to Holzmann's words.

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