In the hearing at European Parliament’s Committee on Economic and Monetary Affairs, ECB President Christine Lagarde said two main factors called for additional monetary policy announced at the last meet. They are the “deteriorating inflation outlook threatening our medium-term price stability objective and the unwarranted tightening of financial conditions.”

Hence, the central bank decided to rise the amount of the PEPP by additional EUR 600B to EUR 1350B, extend the program until at least end of June 2021, and to reinvest maturing assets until at least end of 2022.

She emphasized that the crisis-related measures are “temporary, targeted and proportionate”. And the measures “underscore the Governing Council’s continued determination and readiness to adjust all of its instruments, as appropriate, to ensure that inflation moves towards its aim in a sustained manner.”

The PEPP expansion will “prove to have been essential in avoiding an even deeper recession and in quickening our pathway to normalisation”

Full statement here.

ECB Chief Economist Philip Lane said in a blog post that the decision to expand the PEPP is “the proportionate response to the substantial downward revision of the economic and inflation outlooks and the significant deterioration in financial conditions”.

He added, “the incoming economic and financial data and future projection rounds will provide essential guidance as to whether the pandemic-related negative shock to inflation dynamics has been sufficiently contained.” “Once the negative pandemic shock has been successfully managed, the primary focus of monetary policy can return to its underlying strategic goal of robustly achieving our inflation aim over the medium term.”

In the post meeting press conference, ECB President Christine Lagarde said economic data have shown some signs of a “bottoming-out” in the economy, alongside the gradual easing of coronavirus containment measures. But “the improvement has so far been tepid compared with the speed at which the indicators plummeted in the preceding two months.”

In the baseline scenario of new economic projections, GDP is expected to fall by -8.7% in 2020 (revised down by -9.5% from March projections), then rebound by 5.2% in 2021 (revised up by 3.9%) and 3.3% in 2022. Balance of risks are to the downside.

HICP inflation is projected to be at 0.3% in 2020 (revised down by -0.8%), 0.8% in 2021 (revised down by -0.6%) and 1.3% 2022 (revised down by -0.3%).

Full press conference statement here.

ECB announced to increase the pandemic emergency purchase programme (PEPP)  by EUR 600B to a total of EUR 1350B today. Purchases will continue to conducted in a “flexible manner over time, across asset classes and among jurisdictions”.

Also, the horizon of PEPP net purchases will be extended to “at least the end of June 2021”. Additionally, “the Governing Council will conduct net asset purchases under the PEPP until it judges that the coronavirus crisis phase is over.” Maturing principal payments will also be reinvested “until at least the end of 2022”.

Asset purchase programme net purchase will continue at monthly pace of EUR 20B and it’s expected to “run for as long as necessary”. Reinvestments of principal payments will also continue, “for an extended period of time”.

Interest rates are held unchanged, with main refinancing rate at 0.00%, marginal facility rate at 0.25% and deposit rate at -0.50%.

Full statement here.