Market Extra: ECB says it’s prepared to ‘recalibrate’ stimulus in December

The European Central Bank says it's prepared to “recalibrate” its monetary stimulus efforts in December, noting risks to the economic outlook are “clearly tilted to the downside.” Read More...

European Central Bank President Christine Lagarde is seen on a screen as she speaks during... — European Central Bank President Christine Lagarde is seen on a screen as she speaks during a meeting of the Franco-German Parliamentary Assembly in September.

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The European Central Bank on Thursday said it was prepared to “recalibrate” its monetary stimulus programs in December, recognizing that it faces an environment in which risks are “clearly tilted to the downside.”

In a statement, the bank’s Governing Council said a new round of staff forecasts in December would allow a thorough reassessment of the economic outlook and the balance of risks. Based on that update, the Governing Council will recalibrate its instruments, as appropriate, to respond to the unfolding situation and to ensure that financing conditions remain favorable to support the economic recovery and counteract the negative impact of the pandemic on the projected inflation path, the ECB said.

Policy makers will “carefully assess the incoming information, including the dynamics of the pandemic, prospects for a rollout of vaccines and developments in the exchange rate,” the Governing Council said.

The ECB, as expected, left its deposit rate at minus 0.5% and its refinancing rate at 0%, while again reaffirming plans to leave rates at present or lower levels until inflation rises to converge with the central bank’s target.

The Governing Council also said it would continue purchases under its 1.35 trillion euro pandemic emergency purchase program, or PEPP, until at least the end of June 2021 “and, in any case, until it judges that the coronavirus crisis phase is over.” The Governing Council will reinvest the principal payments from maturing securities purchased under the PEPP until at least the end of 2022, the ECB said.

It will also continue to make net purchases under its asset purchase program, or APP, at a monthly pace of 20 billion euros. Those purchases will be accompanied by purchases under the additional €120 billion temporary envelope until the end of the year.

ECB President Christine Lagarde will hold a news conference at 2:30 p.m. Frankfurt time, or 9:30 a.m. Eastern.

European countries set a series of coronavirus records this week and reintroduced business lockdowns in some countries.