LONDON (MaceNews) – The chief economist of the European Central Bank raised the prospect of expanding the size and scope of the bank’s emergency pandemic program, adopting a more dovish tone than he had just over a week ago.
“We are fully prepared to further adjust our instruments … [including] increased the size of the PEPP and adjusting its composition,” said Philip Lane in remarks prepared for the Institute for Monetary and Financial Stability Policy Webinar on Tuesday. Enhancements will be as wide “as necessary and for as long as needed.”
In an interview published in the Spanish newspaper El Pais on Monday — which was conducted on May 11th — Lane downplayed speculation of an expansion of the program at the ECB’s general council meeting next month. “The exact figure is of secondary importance … we are in the process of analyzing the situation,” he said.
The Pandemic Emergency Purchase Programme allows for the acquisition of 750 billion euros in bond purchases, on top of the ECB’s ongoing asset purchase program. Crucially, securities acquired under PEPP can deviate from the ECB’s capital key, allowing additional purchases of lower-rated debt from fiscally-challenged southern European countries, such as Greece.
Lane made no mention on Tuesday of a recent German court ruling that raised questions about the legality of the existing quantitative easing program. However, he voiced his disagreement with the ruling in the La Pais interview.
The chief economist reiterated the ECB’s forecast of a 12% slump in 2020 GDP in the most “severe scenario,” adding that the current quarter represents the trough of the crisis under all of the bank’s forecasting scenarios.