ECB WATCH | The ECB amps up PEPP purchases to check yield rise

The ECB, as expected, left its benchmark interest rates and broader policy guidance unchanged, but surprised boldly by announcing a significant step up of asset purchases under the PEPP next quarter. The decision was a clear response to the recent increase in bond yields.

Key points

• Key points:
• The central bank’s immediate focus is on keeping financial conditions favourable
• The staff projections for GDP growth have been maintained broadly unchanged which do not incorporate yet the latest US stimulus package
• We consider that the PEPP envelope is large enough to comfortably increase purchases over the next quarter without the ECB having to increase the PEPP envelope

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