The bottom line was that there was a slight tweak. The asset purchases under the APP and the PEPP programme are both to carry on. The APP purchase will continue at €20 bln a month. However, the Governing Council decided that the pace of asset purchases under the PEPP programme could be slightly reduced. The PEPP purchases are now to be conducted at a ‘moderately lower pace’ versus the previous decision of a ‘significantly higher pace’.

ECB’s view on the economy

The risks remain broadly balanced and the euro area economic rebound is seen as broadly advanced. Output is expected to exceed pre-pandemic levels by the end of 2021 and current inflation is still seen as temporary. Inflation targets are still seen as below target for the medium term. So, remember that the ECB is not wanting to move on interest rates without being convinced that inflation is rising in a meaningful and significant way that can only be managed by central bank action. This is to differentiate between the supply side constraints from COVID-19 and related price surges.

What does this mean?

In the press conference, it was clarified that the tweak to the PEPP purchases is not considered ‘tapering’. This reflects that the ECB are wanting to simply avoid overkill with too much APP purchases and not signal a material shift in policy outlook. Further PEPP discussion will take place in December. There was little new here at the meeting and the ECB is remaining on a ‘wait and see’ stance. Moving forward the focus remains on incoming data and the December meeting. There was nothing obviously tradable from the latest ECB decision as the ECB stuck to market expectations.