ECB announces their final policy decision for the year - 10 December 2020
- Prior decision
- Deposit facility rate -0.50%
- Main refinancing rate 0.00%
- Marginal lending facility 0.25%
- Extends window for lowest rate on TLTROs
- Raise total amount that counterparties will be entitled to borrow in TLTRO operations from 50% to 55% of their stock of eligible loans
- Extends duration of April collateral easing to June 2022
- QE to continue at a pace of €20 billion per month
- Repo, swap lines with non-euro area central banks extended until March 2022
- Policy measures taken today will contribute to preserving favourable financing conditions over the pandemic period
- Uncertainty remains high, including with regard to the dynamics of the pandemic and timing of vaccine rollouts
- Full statement
Essentially, this is all good news for risk as the measures taken by the ECB ensures that liquidity and credit conditions will be sufficient for a long time to go.
The 9-month extension of the PEPP stimulus may yet be the sweet spot between a supposedly debated 6-month and 12-month extension in the lead up to the meeting.
There are no other major surprises as the ECB maintains that they will continue the supportive measures "until it judges that the coronavirus crisis phase is over".
The euro jumped from 1.2090 to 1.2118 but I don't see much to get too excited in the immediate term. This should have already been priced in but it does bolster the stronger euro narrative as it allows for better financing/economic conditions in the region.
Lagarde's press conference will be more interesting. She will have to walk a fine balance between striking optimism on the outlook amid recent vaccine developments, while having to maintain that it is necessary to ease further all the way through to 2022.
There's also the language on the euro to watch later on as well.
