Yesterday the ECB delivered another dollop of expansionary monetary policy when it increased the size of the Pandemic Emergency Purchase Programme (PEPP) by EUR600bn, taking the total to EUR1.35tn. Policymakers had debated as to the size of the expansion, between EUR500bn and EUR750bn before settling on the compromised figure. The ECB also extended the horizon for net purchases under PEPP to at least June 2021 as well as deciding to reinvest the maturing principal payments from securities bought under the PEPP until at least the end of 2022. The interest rates on the main refinancing operations, marginal lending facility and the deposit facility remained unchanged at 0.00%, 0.25% and -0.50% respectively.
In a statement accompanying the increase, the ECB said ‘In response to the pandemic-related downward revision to inflation over the projection horizon, the PEPP expansion will further ease the general monetary policy stance, supporting funding conditions in the real economy, especially for businesses and households. The purchases will continue to be conducted in a flexible manner over time, across asset classes and among jurisdictions. This allows the Governing Council to effectively stave off risks to the smooth transmission of monetary policy’.
Today we also had May’s Nonfarm Payroll numbers. The market consensus was for 7.5m job losses, unemployment rate at 19% and participation rate of 60.1% before the figures. However, the range of estimates was colossal, with the standard deviation of those estimates at almost 90 times that of a typical month.
In a massive surprise, the actual number of jobs unexpectedly rose 2.51 million with the previous month’s figure revised up to 20.68 million from 20.53 million job losses. The unemployment rate also unexpectedly fell to 13.3% versus the prior month’s reading of 14.7% and the participation rate rose to 60.8% from last month's 60.2%.