Pandemic Emergency Purchase Programme (PEPP)
20 hours agoThe Pandemic Emergency Purchase Programme (PEPP) is a temporary initiative aimed at purchasing assets from both private and public sectors. In response to the COVID-19 crisis, the European Central Bank (ECB) introduced a €750 billion PEPP.
On June 4, 2020, the ECB announced an increase of €600 billion to the PEPP, raising the total to €1.35 trillion. The program's duration was also extended from the end of 2020 to June 2021, or until the ECB deems the crisis to be resolved.
On December 10, 2020, the ECB further enhanced its emergency pandemic QE program by adding €500 billion, bringing the total to €1,850 billion. The statement from December indicated that this decision was made in light of the economic impact from the resurgence of the pandemic. Purchases under the PEPP are set to continue for an additional nine months, until March 2022, or until the ECB determines that the crisis phase of the coronavirus is over.
This program serves as a substantial stimulus package from the ECB to alleviate the economic disruption caused by the pandemic. It expands upon the ECB’s Asset Purchase Programme (APP), which was initiated in 2014 to bolster monetary policy.
Similar to the APP, the PEPP includes initiatives to acquire sovereign debt, covered bonds, asset-backed securities, corporate bonds, and commercial paper. The ECB will also make available for lending any securities purchased under the PEPP, just as it does with the APP.
Why is PEPP important? On March 18, 2020, the ECB introduced PEPP as a temporary measure to buy up to €750 billion in public and private-sector securities until the “crisis phase” of the COVID-19 situation is resolved, at least until the end of 2020.
The aim of the ECB’s Pandemic Emergency Purchase Programme is to support liquidity and the financial stability of all sectors within the eurozone economy. This new temporary asset purchase initiative focuses on both private and public sector securities, which, along with a €120 billion increase in the ECB’s €20 billion monthly asset purchase program announced on March 18, 2020, totals 7.3 percent of the euro area GDP.
Purchases under the program commenced on March 26, 2020, and will continue at least until June 2021, with the possibility of extension if the ECB assesses that the pandemic remains in a crisis phase. Christine Lagarde, the President of the European Central Bank, has emphasized that the ECB is fully prepared to increase the size and modify the composition of this asset purchase program as necessary.
The ECB has confirmed that asset categories eligible under the existing asset purchase program (APP) will also be eligible under the PEPP, including:
- Corporate Sector Purchase Programme (CSPP)
- Public Sector Purchase Programme (PSPP)
- Asset-Backed Securities Purchase Programme (ABSPP)
- Third Covered Bond Purchase Programme (CBPP3)
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