By William Watts, MarketWatch
Over to you, Brussels.
As expected, European Central Bank policy makers on Thursday did nothing to steal the limelight from European heads of state and government on the eve of a two-day Brussels summit meeting called to iron out agreement on a historic fiscal spending plan aimed at shoring up the economy as it struggles to regain its footing in the wake of the COVID-19 pandemic.
“An ambitious and coordinated fiscal response remains critical,” ECB President Christine Lagarde said in a news conference.
The euro /zigman2/quotes/210561242/realtime/sampled EURUSD +0.2032% strengthened somewhat, rising 0.2%, to trade at $1.1435 after trading at a more-than-four-month high on Wednesday. European government bond yields were lower, while stocks /zigman2/quotes/210599654/delayed XX:SXXP -1.81% maintained small losses.
The ECB left interest rates unchanged and made no tweaks to its asset-purchase programs on Thursday. The central bank has already been aggressive when it comes to the monetary policy response to the pandemic that has hammered the eurozone economy and world growth, having moved in June to significantly expand its pandemic emergency purchase program, or PEPP, to €1.35 trillion ($1.54 trillion).
“Right now, the ECB is catching its breath and taking stock of the actions taken so far. During the press conference, President Lagarde stressed that hopes and expectations now also lie with the European Council, which will negotiate the details of the €750 billion coronavirus recovery package over the next two days,” said Kay Daniel Neufeld, head of macroeconomics at the Center for Economics and Business Research.
Economists see scope for the ECB to take additional action in coming months, and a failure by EU leaders to reach a deal on a fiscal plan could put pressure on monetary policy makers to take additional action sooner rather than later, economists said.
“We stick to our view that the ECB will wait until the September meeting, if not the late October meeting, before deciding on any next steps,” said Carsten Brzeski, chief eurozone economist at ING, in a note. “This is when after the initial V-shaped rebound of the eurozone economy, there will be a better picture of the actual recovery. Luckily there won’t be any more ECB press conferences which have to bridge the void of not having to say anything.”