Event Update - European Central Bank decides to discontinue PEPP - ICICI Direct

Key Highlights

- ECB kept its benchmark interest rate unchanged

- The central bank decided to temporarily raise monthly net asset purchases to &Euro;40 billion in the second quarter and &Euro;30 billion in the third quarter under the APP. From October 2022 onwards, the Governing Council will maintain net asset purchases under the APP at a monthly pace of &Euro;20 billion

- The central bank said it would conduct bond purchases under its emergency programme at a 'lower pace" than in previous quarter and discontinue net asset purchases under the PEPP at the end of March 2022

- ECB President Lagarde said inflation is expected to remain elevated in the near term but should ease in the course of next year

Impact on EURUS$

EURUS$ is likely depreciate further till 1.10 on strong dollar and divergence in monetary policy between US Federal Reserve and European Central Bank. US Federal Reserve accelerated the reduction of its monthly bond purchases, opening doors for earlier rate hike whereas, ECB decided to discontinue net asset purchases under PEPP but temporarily raise monthly net asset purchases and promised to hold down borrowing coasts next year and keep doors open to restart emergency support if required. Further, the bank said economic activity has been moderating over the final quarter of the year. This slower growth is likely to extend into the early part of next year. Compared with September staff projections, the outlook has been revised down for 2022 and up for 2023. Additionally, investors fear that rising Covid-19 cases and imposition of new restrictions to curb the spread of new Omicron variant would delay in economic recovery.

For details, click on the link below: Link to the report

Source : Equity Bulls

Keywords

ECB PEPP EventUpdate ICICIDirect