By Geoffrey Smith
Investing.com -- The European Central Bank said Thursday it will increase the size of its main pandemic-fighting bond purchase program by 600 billion ($672 billion), ramping up its efforts to support a Eurozone economy that is expected to shrink by more than 8% this year.
The ECB also said after its regular council meeting that it will stretch the purchases under the Pandemic Emergency Purchase Program out until at least the middle of next year. "In any case, the Governing Council will conduct net asset purchases under the PEPP until it judges that the coronavirus crisis phase is over," it added.
The bank will also reinvest the proceeds of any PEPP holdings that mature until 2022, a move that will marginally sustain and prolong the stimulus effect.
"After the announcement of the European Recovery Plan and last night’s powerful German fiscal stimulus package, the ECB has added to real stimulus fireworks," said Carsten Brzeski, chief eurozone economist with ING in Frankfurt.
The bank made no other major changes to its policy stance, leaving its key interest rates unchanged, as expected and not changing the overall volume of its other bond purchases, which will continue to run at 20 billion euros a month.
The euro hit its highest level in nearly three months against the dollar on the news, reflecting that a minority of investors had expected a further cut in the -0.5% deposit facility rate. By 7:57 AM ET (1157 GMT), the euro was up 0.3% at $1.1268, just off its earlier high of $1.1272.