MNI POLICY: PEPP Hike Possible; ECB Supports IMF SDR Facility

By Luke Heighton

     FRANKFURT (MNI) - The European Central Bank will increase the size,

duration and composition of its emergency PEPP programme if necessary, president

Christine Lagarde said Thursday, as she called more coordinated global efforts

to counter the social and economic fallout caused by the Covid-19 pandemic.

     The ECB is also "open to exploring a possible new special drawing rights

(SDR) allocation for all IMF members," Lagarde told IMF members in a virtual

meeting.

     Here are the key points from the speech:

     --"Further international efforts will be needed to counter the consequences

of the outbreak and spread of the coronavirus," Lagarde said.

     "The Governing Council," she said, is "fully prepared to increase the size

of its asset purchase programmes and adjust their composition, by as much as

necessary and for as long as needed." The Governing Council will explore "all

options and all contingencies to support the economy through this shock."

     --Given the nature of the situation, it is "extremely difficult to predict

the likely extent and duration of the imminent recession and subsequent

recovery,"she continued. However, headline inflation is expected to decline

further in the near term, while the implications of the coronavirus crisis for

inflation over the medium term are surrounded by high uncertainty.

     --In addition to swap line arrangements already agreed with some EU central

banks to provide euro liquidity, the ECB is assessing further requests for

euro-providing swap lines in line with its mandate, Lagarde said.

     --The ECB is "open to exploring a possible new special drawing rights (SDR)

allocation for all IMF members. The October 2019 package on IMF resources needs

to be implemented speedily to help maintain the IMF's lending capacity of USD1

trillion," Lagarde said.

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

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

[TOPICS: M$X$$$,M$$EC$]