ECB acknowledges 'clear' downside risks to economy

Rate-setters in Frankfurt kept policy unchanged but signalled clearly that more stimulus was a very likely possibility when they met again in December.

In a statement immediately following the governing council's meeting earlier on Thursday, the European Central Bank began by acknowledging that risks to the economy were "clearly" tilted to the downside.

"In the current environment of risks clearly tilted to the downside, the Governing Council will carefully assess the incoming information, including the dynamics of the pandemic, prospects for a rollout of vaccines and developments in the exchange rate," the statement read.

"The new round of Eurosystem staff macroeconomic projections in December will allow a thorough reassessment of the economic outlook and the balance of risks."

Looking out to ECB chief, Christine Lagarde's press conference at 1330 GMT, Claus Vistesen said journalists were likely to press her on "just how worried [she] and the council is about the deterioration in the near-term outlook, and how they intend to respond."

Journalists were also likely to ask for more details about what additional measures the central bank would deploy and the exact mix of those.

So too, they were likely to ask whether the council still believed that core consumer prices, the ECB's chief inflation gauge, was still expected to rise in 2021.

Interest rates on the ECB's main refinancing, marginal lending and deposit facilities were all unchanged at 0.0%, 0.25% and -0.5%, respectively.

So too, the council kept the size of its emergency pandemic bond purchase programme at €1.35trn.

Net purchases under the PEPP were still seen continuing until "at least June 2021 and, in any case, until it judges that the coronavirus crisis phase is over."

The principal from maturing securities bought under PEPP were set to continue until the end of 2022.

Separate purchases under the Asset Purchase Programme would be maintained at €20bn per month, alongside the purchases under the additional €120bn temporary envelope until the end of the year, with monthly buying to continue "for as long as necessary to reinforce the accommodative impact of its policy rates, and to end shortly before it starts raising the key ECB interest rates."

Ample liquidity would also continue to be offered via the ECB's refinancing operations, especially through its TLTRO III.