Concerns Over COVID-19 Double-Dip... ECB to Expand Asset Purchases by 500 Billion Euros

Purchase period extended by 9 months... Bank liquidity supply maintained
Lagarde: "Economic recovery if herd immunity forms by end of next year"

[Image source=Reuters Yonhap News]

[Asia Economy Reporter Jeong Hyunjin] The European Central Bank (ECB) has decided to expand its asset purchase program by 500 billion euros (approximately 658.5 trillion KRW). This move aims to maintain market liquidity through additional monetary easing amid growing concerns of a 'double dip' recession as the COVID-19 pandemic resurges and the economy falls back into a downturn.

According to Bloomberg and other sources on the 10th (local time), the ECB held a monetary policy meeting and announced that it would increase the asset purchase size of the Pandemic Emergency Purchase Programme (PEPP) from 1.35 trillion euros to 1.85 trillion euros. The net purchase period was extended by nine months from the original end date of June 2021 to the end of March 2022. The principal repayments from maturing securities under the PEPP will also be reinvested at least until the end of 2023.

Liquidity provision through the targeted longer-term refinancing operations (TLTRO III), which lend funds to banks, will also continue. The ultra-low interest rate loans to banks will be extended until December 2021, with the rates applied through June 2022. However, the key interest rate will remain at the current 0%, and the deposit rate and marginal lending rate will be maintained at -0.50% and 0.25%, respectively.

The ECB revised its economic growth forecast for the Eurozone (19 countries using the euro) this year from -8% to -7.3%. It expects growth of 3.9% in 2021, 4.2% in 2022, and 2.1% in 2023. The ECB also projected that inflation will remain significantly below the 2% target through 2023.

Christine Lagarde, President of the ECB, stated, "Downside risks due to COVID-19 still remain, but the severity has lessened thanks to vaccine development and distribution," adding, "There is good reason to believe that herd immunity will be achieved by the end of 2021, and when that happens, the economy will return to normal functioning."

This content was produced with the assistance of AI translation services.