Breaking News: European Central Bank boosts pandemic stimulus by €500b

BREAKING NEWS: European Central Bank boosts pandemic stimulus by €500b and extends it to March 2022 as it increases its efforts to shield the euro-zone from a possible double-dip recession.

The European Central Bank (ECB) has kept its word at the last meeting of the year by adding another €500 billion to the purchase program against the pandemic (PEPP), which is now up to €1.85 trillion in total.

The announcement made by ECB President Christine Lagarde on Thursday, December 10, also states that it has extended it until March 2022, with the bank further announcing new long-term liquidity auctions for banks (TLTRO) with very favourable conditions for the sector.

Interest rates have also remained unchanged and at an all-time low.

The announced measures represent the second modification of the PEPP since its birth in March 2020, after its initial investment  at the beginning of the pandemic for purchases of sovereign and corporate bonds.

Furthermore, the ECB has decided to extend the reinvestment of PEPP bond maturities until at least the end of 2023 which means that even if the PEPP ends (net purchases), the ECB will keep the size of its balance stable by buying the debt, which should maintain very high liquidity levels in the euro area.

The Governing Council has decided to recalibrate the conditions of the third series of specific longer-term financing operations (TLTRO III). Specifically, it has been necessary to extend the term in which considerably more favourable conditions will be applied by twelve months (banks can earn up to 1 per cent by borrowing from the ECB and giving credit to the real economy), until June 2022.

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