Economists: ECB to extend pandemic programs

ISTANBUL

A European Central Bank (ECB) meeting on Thursday is expected to deal with use of the pandemic emergency purchase program (PEPP) and longer-term refinancing operations (TLTRO), economists told Anadolu Agency.

Stating that the ECB is facing some problems, Peter Vanden Houte, chief eurozone economist of ING Bank based in Amsterdam, stressed on Wednesday that renewed coronavirus containment measures had slowed down growth.

Moreover, inflation is currently negative and not likely to move rapidly towards the 2% level, he said.

"The euro has been strengthening against the US dollar, which generates further downward pressure on both growth and inflation. The ECB, therefore, has to act and it already signaled during the previous meeting that it would recalibrate its current policy measures."

Saying that the two most favored tools for quantitative easing are the PEPP and TLTRO, Houte said the emphasis on these programs is expected and more likely their duration.

"We expect an increase in the PEPP program by up to €500 billion and extension of this program until the end of 2021. An extension of TLTROs by 12 months, until June 2022, is also expected."

Elwin de Groot, head of macro strategy at Dutch-based Rabobank, said the ECB is set to recalibrate its policy next week, with a very clear message that easing will be based around the instruments of PEPP and TLTRO.

"We expect an increase in the PEPP program of €400 billion and 12-month extension. We also expect the TLTRO discount to be extended through June 2022 and interest rates put on hold," he added.

Michael Schubert, senior economist at Frankfurt-based Commerzbank, also stressed that PEPP is likely to be extended until at least the end of 2021 with an increase of total volume by €600 billion.

*Writing by Yunus Girgin in Ankara