Because of a historic economic downturn in the eurozone, the ECB is expanding its emergency program against the consequences of the corona pandemic. It increased the volume of its bond purchases used for this purpose from EUR 750 billion to EUR 1.35 trillion.
As announced by the ECB after its monetary policy meeting on Thursday, the "Pandemic Emergency Purchase Program" - PEPP for short - which has been scheduled until the end of the year, is to be extended until at least the end of June 2021. The monetary watchdogs hope that the hard-hit economy of the euro area will get back on its feet - especially through improved financing conditions for companies and households.
Chief economist Thomas Gitzel from Liechtenstein's VP Bank said that the expansion of securities purchases would particularly benefit countries that are plagued by debt, such as Italy and Greece: “Because of a massive rise in government debt, the question of debt sustainability arises. The ECB's purchases are pure balm for these countries. ”
The economy of Volker Wieland fell into the same horn: "The ECB is now again in the template. For highly indebted countries, the implementation of their expensive economic plans depends heavily on the ECB, which uses its policies to cut interest rates and make financing more attractive. ”Chief economist Alexander Krüger from Bankhaus Lampe was surprised at the extent of the increase in the emergency program:“ With The sip from the bottle is big in the new 600 billion euros. This suggests grumpy growth and inflation projections. ”
Penalty rates for banks remain
According to the European Central Bank (ECB), the corona recession will be more severe than previously thought. The gross domestic product in the euro area is likely to collapse by 8.7 percent this year, as ECB President Christine Lagarde announced on Thursday after her interest rate meeting in Frankfurt. In March, the economists at the central bank still thought the growth of 0.8 percent was possible. A noticeable recovery is expected for the next two years: the growth of 5.3 percent is expected in 2021 and 3.3 percent in 2022. So far, 1.3 and 1.4 percent had been predicted.
The severe crisis is likely to dampen inflation. An average inflation rate of only 0.3 percent is expected for this year. So far, the ECB had assumed 1.1 percent. The Governing Council left the key interest rate unchanged at zero percent. The deposit rate remained at the previous level of minus 0.5 percent. This means that banks must continue to pay penalty interest if they park excess funds with the euro central bank.
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