The ECB will launch new longer-term refinancing operation (TLTRO) at an interest rate as low as -0.75% and increase bond purchase programme by EUR 120bn in the coming months.
Following up on yesterday’s blog, the ECB announced set of tools to counter the economic shock caused the by Coronavirus. To be specific, the ECB stated that they would roll out cheap loans for banks, at an interest rate as low as -0.75%, and temporarily increase bond purchases under its EUR 2.6tr bond-buying program. The mentioned program, which is currently running at EUR 20bn a month, will be increased by a total of EUR 120bn through the end of the year, and focus on private-sector bonds (such as corporate bonds).
It is important to add that ECB did not cut their key interest rate, which came as a surprise, as such a move was expected by many investors after major central banks (including FED) announced large interest rate cuts in the previous days.
Looking at the markets, investors were not excited on the announced package, as it seems that they are waiting for the key thing – the number of infected individuals by coronavirus to decelerate. Furthermore, we are still waiting for the bigger fiscal packages coming from core EA countries and more details on tax cuts in the US.