In the accounts of December 9-10 monetary policy meeting, ECB noted “market sentiment had improved notably following the news of the successful development of vaccines and on account of expected monetary policy measures.” But uncertainty “remained high” and concerns were voiced over exchange rate developments, and the “negative consequences for the inflation outlook.”
The resurgence of the pandemic, downward revision in inflation forecasts and risk of unanchoring inflation expectations, “additional monetary policy measures were necessary”. However, the “current environment warranted a recalibration of policy instruments… rather than the adoption of additional measures”.
“The expansion and extension of PEPP purchases and the recalibration of the TLTRO III conditions were widely seen as the most suitable tools to ensure that financing conditions remained favourable throughout the pandemic.”
