HomeContributorsFundamental AnalysisECB Preview: Recalibrating, Not Easing

ECB Preview: Recalibrating, Not Easing

  • The ECB is set to recalibrate its monetary policy instruments at next week’s meeting and the question is which tools it will use. Recent comments have focused on more PEPP and TLTROs as the main tools, but we expect the ECB to tweak its more technical parameters, such as tiering and collateral rules, as well.
  • PEPP. We expect the ECB to add another EUR400bn to the current PEPP envelope running at least until end-2021. The ECB may also increase the APP purchase rate, but this is less powerful than the PEPP and it is not as important for the overall ECB monetary policy stance unless the purchase rate is increased significantly to, e.g., more than EUR40bn/month. The ECB will not commit to a monthly target under the PEPP.
  • TLTRO/PELTROs. Extend the discount window to the entire duration of the liquidity operation (3y). Provide four additional TLTRO liquidity operations until Q1 22 (quarterly basis) and expand the eligibility pool. PELTROs to continue into end-2021 on a monthly basis.
  • Tiering. Increase the tiering multiplier to 10x the reserve requirement.
  • Collateral. Extending the 7 April grandfathering of the collateral eligibility rules until end-2022.
  • No rate cut. Still no rate cut, but repeating the option to cut if needed.

Full report in PDF.

Danske Bank
Danske Bankhttp://www.danskebank.com/danskeresearch
This publication has been prepared by Danske Markets for information purposes only. It is not an offer or solicitation of any offer to purchase or sell any financial instrument. Whilst reasonable care has been taken to ensure that its contents are not untrue or misleading, no representation is made as to its accuracy or completeness and no liability is accepted for any loss arising from reliance on it. Danske Bank, its affiliates or staff, may perform services for, solicit business from, hold long or short positions in, or otherwise be interested in the investments (including derivatives), of any issuer mentioned herein. Danske Markets´ research analysts are not permitted to invest in securities under coverage in their research sector. This publication is not intended for private customers in the UK or any person in the US. Danske Markets is a division of Danske Bank A/S, which is regulated by FSA for the conduct of designated investment business in the UK and is a member of the London Stock Exchange. Copyright (©) Danske Bank A/S. All rights reserved. This publication is protected by copyright and may not be reproduced in whole or in part without permission.

Featured Analysis

Learn Forex Trading