Going into the ECB meeting there were expectations that after the ECB’s strategic review, the ECB would be revealing a more dovish hand. At the heart of those dovish expectations was the theory that the ECB would somehow morph the emergency PEPP purchase program (due to expire in 2022) into the standard €20 billion a month AP program. This was hinted at in the run-up to the meeting by Christine Lagarde who said that the PEPP could ‘change’ into something else. However, the statement was not explicit. It was a case of trying to read between the lines.

Balancing act

Within the GC are fiscal conservatives like Germany and the more liberally minded Italians, so getting an agreement was always going to be tough. This meeting really showed that there is still work to be done and ultimately the doves were disappointed. Rates were unchanged and so too were both the PEPP and the AP programs. So, here is what could be gleaned from the meeting.


Christine Lagarde said that they were at the ‘effective lower bound’. However, the statement explicitly says that, ‘the Governing Council expects key interest rates to remain at their present or lower levels…’

Dovish message?

Not so according to Christine Lagarde. The New ECB message is not that the ECB is ‘lower for longer’. Apparently, PEPP was not discussed and neither was the link between APP and interest rates


Christine Lagarde noted some ‘marginal’ disagreement in this months meeting concerning the calibration of some aspects of the forward guidance. Germany’s Weidmann & Belgium’s Wunsch opposed the ECB’s new guidance according to Bloomberg as it signalled a commitment to lower rates for longer. In addition to these two members, sources note that several more voiced objections due to the length of commitment and a lack of clarity.


The ECB will accept an overshoot of inflation which they expect to be temporarily higher. Remember, the know have a symmetric 2% target. Some members wanted to aim for ‘at least 2% inflation’, not just 2% inflation.

The bottom line

It was a dovish meeting. The EUR chopped around at the meeting and in the press conference, but in the end, the EURUSD pair dropped lower as the message was, in its lack of hawkish tones, not a denial of the dovish expectations. Is the ECB really lower for longer? Probably, but incoming data will be important here.