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The likely deterioration in the outlook for economic activity and inflation and the accompanying drop in inflation expectations could lead to an increase in real interest rates, the accounts of the ECB’s March emergency meeting showed on Thursday.

Key takeaways

“Financial conditions worsening running the risk that financial conditions would tighten in a procyclical manner.”

“The economic situation was seen to be deteriorating rapidly.”

“Notwithstanding the hesitation, readiness was also expressed to go along with the carefully phrased communication.”

“Reservations were, however, expressed by some members with regard to the proposed communication on the issue share and issuer limits.”

“All members agreed that a further forceful monetary policy response was warranted.”

“Broad support was expressed for the package of measures proposed by Mr Lane, with some nuances of views regarding specific elements of the proposal.”

“These limits were one of the safeguards to ensure that the governing council acted within its mandate.”

“There was unanimous agreement that bold and decisive action was needed to counter the serious risks posed by the rapidly spreading coronavirus.”

“There appeared to be sufficient scope in the evolution of the purchasable universe to avoid a premature discussion on a possible lifting of these limits.”

“A strong response was also seen to underline the credibility of the ECB’s commitment to using all of its monetary policy instruments.”

“A large majority of members supported the proposal by Mr lane to launch a new pandemic emergency purchase programme.

Market reaction

The EUR/USD pair largely ignored these remarks and was last seen trading at 1.0856, where it was virtually unchanged on a daily basis.