ECB: "In a dark room you move with tiny steps"

1 min

Today the ECB surprised on the dovish side. All rates remained unchanged, but given a substantial revision in its macro forecasts in particular for 2019 and citing a high degree of uncertainty surrounding the outlook, the ECB announced a dovish package by unanimous decision:

  • Recalibration in its forward guidance that rates will stay at the current level at east through the end of 2019. Mr. Draghi stated that several members of Governing Council proposed extending the calendar of forward guidance to March next year; and
  • Launch of a new series of quarterly TLTROs starting in Sept 2019 and ending in March 2021 each with a maturity of two years. Under TLTRO-III, counterparties will be entitled to borrow up to 30% of the stock of eligible loans as at 28 February 2019 at a rate indexed to the interest rate on the main refinancing operations over the life of each operation. Like the outstanding TLTRO program, TLTRO-III will feature built-in incentives for credit conditions to remain favorable.