SEB reviews the ECB decision

Without any surprise the ECB Governing Council decided today to keep its monetary policy stance unchanged. Additional easing measures were not discussed at the meeting, but the Governing Council left no doubt to act immediately by using all the instruments available within its mandate if new downside risks to the outlook for price stability should arise. Therefore, the easing bias remains unchanged in place.

The key ECB interest rates remained on hold and are expected to stay at current or even lower levels for an extended period of time, and well past the horizon of the ECB's net asset purchases. As regards non-standardized measures focus is on the full implementation of all the decisions taken in March. The expansion of asset purchases to €80bn has already started in April and in June the first TLTRO II tender operation will start.

Furthermore purchases under the corporate sector purchase program (CSPP) will start in the same month and will be carried out by six national banks acting on behalf of the Eurosystem. The TLTRO II tender operations and the CSPP are expected to lead to a further easing of financing conditions in the euro area.

As regards helicopter money, ECB president Draghi pointed out that this instrument is fraught with operational and legal difficulties. The Governing Council hasn't discussed helicopter money in the meeting. Hence it is not on the agenda. In response on the recent criticism on the current monetary policy stance the Governing Council unanimously stressed that the ECB is independent and is acting according to its mandate.

Outlook: The expanded asset purchases as well as the start of both the CSPP and the TLTRO II tender operations will add additional monetary liquidity into the system over the coming months. They will put additional downward pressures on money market rates and bond yields and will thus lead to even more favourable financing conditions. With no hints that another review and reconsidering of the monetary policy stance at the June meeting is necessary, the introduction of additional easing measures in that meeting is unlikely.

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