Christmas presents from the ECB
PEPP: The central bank's sharpest weapon
We expect the bond purchases under the PEPP (Pandemic Emergency Purchase Programme) to be extended until the end of 2021. The central bank is also likely to increase the volume. Furthermore, we expect an increase in the factor (tiering factor) at which commercial banks can park money with the ECB without penalty interest. Although a further reduction in the deposit rate cannot be ruled out, we consider the positive effects for the economy to be very limited. Last but not least, we could imagine that the ECB would make existing and new TLTROs even more attractive.
New unconventional measures unlikely
Despite the announcement of further monetary policy measures in December, doubts are growing about whether the current ECB monetary policy can actually cushion the current concerns in the euro zone. Therefore, new opportunities are being feverishly sought. The Corona crisis is leading to considerable burdens, especially in the service sector, to which many companies are at the mercy of no fault of their own. Only if a wave of insolvencies can be prevented should the pandemic be brought under control should there be a rapid economic recovery. Against this background, discussions have arisen on the capital market as to whether the central bank can provide special support for small and medium-sized enterprises (SMEs). However, we consider special support for SMEs, for example through a new series of TLTROs, to be difficult to implement.
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