FRANKFURT, April 30 (Reuters) - - The European Central Bankkept much of its remaining powder dry on Thursday, reaffirmingits already vast bond purchase scheme but holding back on anybig policy move as it is already hoovering up debt at a recordpace.
Following are highlights of ECB President ChristineLagarde’s comments at a press conference after the bank’s policymeeting.
PLAN TO BUY JUNK BONDS?
Asked if the ECB plans to buy junk bonds, in addition to accepting them as collateral, Lagarde said:
The ECB Governing Council “have not discussed any change to the APP (asset purchase programme) eligibility framework at this time”.
PEPP MAY CONTINUE IN 2021
“It is unlike any other programme, which is why it was targeted, it was temporary and it was flexible.
“The life of that PEPP (Pandemic Emergency Purchasing Programme) is going to be determined by the Governing Council. No, it will not end earlier than the end of the calendar year, but depending on the length of the crisis, and this will be the determination of the Governing Council. It might be extended further than the end of 2020.”
“We will use any and all flexibility that we have in accordance with our mandate in order to make sure that our monetary policy is properly transmitted to all jurisdictions from east to west from north to south, to all sectors of the economy.
“And we have the flexibility to do so, so we will use it - full fledge.”
ON ASSET PURCHASES
“We did not discuss the APP but let me remind you that again we are fully flexible, we will look at all options, we will determine and monitor and we will make sure that our monetary stance and our monetary policy transmission are both effective.”
ACTION FROM EU NEEDED
“The Governing Council urges further strong and timely efforts to prepare and support the recovery. In this regard, we welcome the European Council agreement to work towards establishing a recovery fund dedicated to dealing with this unprecedented crisis.”
SEVERE Q2 DOWNTURN
“The sharp downturn in economic activity in April suggests that the impact (of the pandemic) is likely to be even more severe in the second quarter.”
AS MUCH PEPP AS NEEDED
“We are therefore fully prepared to increase the size of the Pandemic Emergency Purchase Programme and adjust its composition by as much as necessary and for as long as needed.”
STANDS READY TO ACT ON INFLATION
“(The) Governing Council stands ready to adjust all of its instruments as appropriate to ensure that inflation moves towards its aim in a sustained manner in line with its commitment to symmetry.”
POLICY FOR ALL JURISDICTIONS
“(ECB’s commitment) ... applies first and foremost to our role in ensuring that our monetary policy is transmitted to all parts of the economy and to all jurisdictions in the pursuit of our price stability mandate.”
CURRENT OR LOWER RATES
“We expect (rates) them to remain at their present or lowerlevels until we have seen the inflation outlook robustlyconverge to a level sufficiently close to but below 2%, withinour projection horizon, and such convergence has beenconsistently reflected in underlying inflation dynamics.”
DO EVERYTHING NECESSARY
“At the same time, in the current rapidly evolving economicenvironment, the Governing Council remains fully committed todoing everything necessary within its mandate to support allcitizens of the euro area through this extremely challengingtime.”
“We continue to expect monthly net asset purchases under theAPP to run for as long as necessary to reinforce theaccommodative impact of our policy rates and to end shortlybefore we start raising the key ECB interest rates.”
“PLTROs... support liquidity conditions in the euro areafinancial system and contribute to preserving the smoothfunctioning of money markets by providing an effective liquiditybackstop.”
“The Governing Council is determined to continue to supporthouseholds and firms in the face of the current economicdisruption and heightened uncertainty in order to safeguardmedium-term price stability.”
JOINT POLICY ACTION NEEDED
“...continued and ambitious efforts are needed, notablythrough joint and coordinated policy action to guard againstdownside risks and to underpin the recovery.”
UP TO 12% GDP FALL
“Growth scenarios produced by ECB staff suggest that euroarea GDP could fall by between 5% and 12% this year, dependingcrucially on the duration of the containment measures and thesuccess of policies to mitigate the economic consequences forbusinesses and workers.”
“The euro area is facing an economic contraction of amagnitude and speed that are unprecedented in peacetime.Measures to contain the spread of the coronavirus, COVID-19,have largely halted economic activity in all the countries ofthe euro area and across the globe.”
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