ECB preview: in fire-fighting mode

The ECB has switched in to fire-fighting mode since the March meeting , as the depth of the recession has become more and more visible. While we expect no new measures to be announced at next week’s meeting, the ECB will stress its readiness to expand its measures further should this be necessary. There are two objectives the ECB will focus on at this stage. First, to ensure accommodative financial conditions and prevent ing tensions in the financial system. Second, to create fiscal space for governments to fight the cyclical consequences of the pandemic. While the ECB will publicly only stress the first objective, creating fiscal space is in the end at least as important to stabilize the economy. Thus, an increase of purchases and/or an expansion of the universe of eligible assets remains a clear possibility.