One year ago, announcing half a trillion euro of additional asset purchases would have been considered a bold and daring move by the European Central Bank (ECB). In the wake of the coronavirus and the massive wave of monetary and fiscal stimulus, these numbers start to lose their impact.

Today’s announcement of an additional €500 billion of asset purchases under the pandemic emergency purchase programme (PEPP), and an extension of the window in which those purchases can be made to March of 2022 alongside other funding for lending programmes, was a major statement of intent from the ECB. However, the market was fully anticipating this step, owing to announcements at the last ECB press conference of a recalibration of policy and various leaks and comments from the ECB over the past month or two.

On the day itself, the announcements landed more or less within the consensus of the market with some upside surprises on the extension of the window of PEPP purchases into 2022 relative to market expectations of an end point in December 2021. However, the nuances of the statement implied an ECB less convinced of its stance than the headlines might have pronounced. In particular it was noted that while the PEPP programme could be extended further, the current envelope of purchases did not have to be fully utilised. While the intention is one of preserving accommodation, there seemed little in the policies or the intent that indicated that the ECB felt it needed to increase the level of accommodation from current levels.
Markets absorbed the news well, with bonds giving back some of their gains from earlier in the day. By and large, the ECB will look at bond markets and currencies and reflect that while perhaps the lack of an enthusiastic response is a bit disappointing, the lack of volatility indicates that their credibility, in so much as their intent to preserve easy conditions, is intact.