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Simon Murray, economist at Westpac, explains that the March ECB policy meeting marked a significant dovish shift in the policy stance as in March they have factored in weakness persisting through the first half of 2019.

Key Quotes

“All up, this saw large downward revisions in the economic projections, the extension of interest rate policy forward guidance to rates expected to be on hold at least through the end of 2019 (previously summer of 2019), and the announcement of a new Targeted Long-Term Refinancing Operations (TLTRO) package in response to the upcoming maturities.”

“New loans through TLTRO-III will start in September 2019 and end in March 2021. As with the upcoming maturing TLTRO-II, they will allow banks to borrow up to 30% of their stock of eligible loans, and will have built-in incentives to encourage banks to lend to households and businesses.”

“A major difference for TLTRO-III is that it will be for a shorter maturity of two years compared to the TLTRO-II of four years which Draghi says relates to the change in conditions (TLTRO-II was made in 2016).”