MNI POLICY: ECB Boosts, Extends PEPP; Announces Reinvestment

By Luke Heighton

     FRANKFURT (MNI) - The European Central Bank will increased its Pandemic

Emergency Purchasing Programme by EUR600 billion to EUR1.35 trillion, the

European Central Bank announced Thursday, adding that it will run until at least

the end of June 2021.

     Maturing principal payments from securities purchased under PEPP will be

reinvested until at least the end of 2022, and until the Governing Council

judges that the coronavirus crisis phase is over.

     The ECB said it was responding to the "pandemic-related downward revision

to inflation over the projection horizon," and that PEPP purchases would

continue in a "flexible manner over time, across asset classes and among

jurisdictions. This allows the Governing Council to effectively stave off risks

to the smooth transmission of monetary policy."

     APP purchases will proceed at their present monthly pace of EUR20 billion

"together with the purchases under the additional EUR120 billion temporary

envelope until the end of the year," for as long as necessary, ending shortly

before the Governing Council starts raising key ECB interest rates.

     Reinvestments of the principal payments from maturing APP securities will

continue to be reinvested in full "for an extended period of time past the date

when the Governing Council starts raising the key ECB interest rates, and in any

case for as long as necessary."

     Key interest rates and interest were unchanged at 0.00%, 0.25% and -0.50%.

--MNI Frankfurt Bureau; +49-69-720-146; email: luke.heighton@marketnews.com

--MNI London Bureau; +44 203 865 3829; email: jason.webb@marketnews.com