The European Central Bank's decision to increase its pandemic emergency purchase program to €1.85 trillion ($2.21 trillion) has been welcomed by money management executives.
The ECB's governing council increased the size of the program by €500 billion and extended the period over which it will conduct net purchases under the program by nine months, to at least the end of March 2022.
The bank also expanded its targeted longer-term refinancing operations program, which provides financing to credit institutions, and kept interest rates unchanged.
"Following the PEPP extension, and considering the ongoing (asset purchase program,) the ECB will be able to buy about €100 billion of assets each month to the end of 2021," Silvia Dall'Angelo, senior economist at the international business of Federated Hermes, said in an emailed comment. "This, together with newly announced (targeted longer-term refinancing operations program) means that the ECB will maintain ample and constant accommodation throughout next year."
Ms. Dall'Angelo said this is a "welcome development, which will help support the recovery from the COVID-related recession next year (once a vaccine becomes widely available,) while also providing some buffer from other risks such as a disruptive Brexit. Yet, the new inflation forecasts are likely to show core inflation still significantly below target in 2023, which in itself would justify a way more forceful response," she said.
Joost van Leenders, senior investment strategist at Kempen Capital Management, said in a separate comment that the main signal from the ECB is that "it will keep monetary policy extremely loose for the foreseeable future. Even with vaccines rolled out in the coming months and a return to normality in the course of next year, the ECB is taking absolutely no risks of erring on the tight side with its monetary policy."
