ECB Minutes to shed further light on future plans - Rabobank

Rabobank analysts suggest that after some substantial changes in the March meeting, today’s monetary policy accounts may shed further light on the ECB’s plans, in particular regarding the TLTRO-III modalities.

Key Quotes

“Of course, we’ve already heard the key points of the 2 year, variable rate operations, but the exact pricing and the mysterious “built-in incentives” were kept under wraps. Following the March meeting, Reuters sources suggested that staff had proposed a base rate of MRO+20bp for these new TLTROs, which the Council said was too expensive. The market will therefore look for any clues about the premium (or discount) over MRO that will be applied to these new long-term operations.”

“While the market will mainly focus on paragraphs relating to the TLTROs’ modalities, we are also keen to find out more about the Council’s reasons to announce more easing measures than the market had expected last month – and in particular, how this followed from the macroeconomic assessment.”

“Recall that not only growth projections were revised down, but that the ECB also cut its longer-term inflation projections. At just 1.6% for 2021, HICP now seems to be drifting away from the ECB’s target again. How concerned is the ECB about these developments?”