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“We don’t feel obligated by what the markets expect of us. We are guided only by our mandate ”. A week after the crucial meeting in which the ECB board will decide whether to increase the firepower of the line of purchases of public securities open for the pandemic (Pepp), the German Isabel Schnabel, a member of the board of directors of the European Central Bank, is planting the his stakes in an interview with Bloomberg. Certainly, December 10, the day of the fateful meeting of the Frankfurt institute, will be a field day for Europe: in addition to the highly anticipated decisions of the ECB, the European Council will also meet to find a solution to the vetoes of Hungary and Poland which block the recovery fund.
“There are many important parameters that we can modify – says Schnabel – It is not just the amount but also the duration and communication. What is clear is that since the start of the pandemic, the Pepp and Tltro auctions have proven highly effective. This is why they are likely to be the main tools for our “recalibration” of the monetary policy response.
It is not a stop to Pepp, which in June was sprayed with another 600 billion euros for a total amount of 1350 billion, well beyond the expectations of the markets which were counting on an increase of 500 billion euros. But Schnabel’s words say that the discussion on the decisions to be taken next week is open in the Governing Council. And nothing is taken for granted, even if investors ask for it.
Already in October, the central bank should have taken other decisions on the purchase program which is currently scheduled to end in June 2021. The second wave of pandemic that swept across the old continent two months ago prompted President Christine Lagarde to take time. “The ECB was there during the first wave of the virus, it will also be there during the second wave”, Lagarde said in October, but today the Governing Council was “unanimous” in believing “that it is necessary to act and therefore recalibrate our instruments in the next meeting in December “.
On December 10, the 27 European leaders will also meet to unblock the recovery fund from the stalemate in which Hungary and Poland have sunk it. At the moment, the mediation of Angela Merkel, the current president of the EU, has not led to solutions. The game is getting complicated. While Schnabel’s words could be the light of an internal confrontation on the ECB board between hawks and doves, often in contrast, since the days of Mario Draghi’s ‘Quantitative easing’.
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