The Day at a Glance | December 16 2021

The Top

*ECB opts for increasing the purchasing program in order to smoothen the emergency program´s withdrawal.

*A monetary policy decision is expected to be made on behalf of the Central Bank of Mexico this afternoon.

*Central Bank of England surprisingly increased its interest rate (15 bp to 0.25%) in light of inflation.

*European economy slowed down during December, according to HIS/Markit PMI (Composite PMI 53.4 vs 55.4 prev.).

*Bolsonaro sacks IMF representatives in Brazil after a diplomatic disagreement and criticizing the organization´s estimates.

*France, Italy and Greece announce new regulations to limit international travelers.

Economic environment

Decision in the ECB. The European Central Bank decided to leave its interest rate unchanged this morning (-0.5% deposits; 0% refinancing) and announced that it will increase the volume in the conventional asset purchase programs (APP) for 6 months in order to smoothen the impact of the withdrawal of the pandemic emergency purchase program (PEPP), which will come to an end in March of 2022. Additionally, it affirmed that it will make the rules of reinvestment more flexible regarding assets purchased through the PEPP in order for it to work as a tool in case there is turbulence in financial markets. Members of the ECB confirmed that the emergency purchase program (PEPP) of 1.85 trillion euros will come to an end in March, while the conventional asset purchase program (APP) will be increased from 20 billion to 40 billion monthly euros in the next 3 months. It will then be reduced to 30 billion euros 3 months after that, and will finally go back to 20 billion starting in October. The ECB assured that it will keep the option of reactivating the PEPP open, if necessary. Stocks respond to less of a need for stimuli as production approaches pre-pandemic levels and inflation increases. However, the ECB has opted for maintaining tools active in order to face any possible slowdown that is triggered by the virus´s new outbreaks and could affect growth. Lastly, the ECB has not abandoned its belief that inflation in the Eurozone is transitory, which is why it maintains a much more accommodative stance with respect to other central banks in advanced economies (except for Japan).