ECB hints at December stimulus amid new COVID-19 lockdowns

Yahoo Finance’s Brian Cheung joins Zack Guzman to discuss.

Video Transcript

ZACK GUZMAN: Earlier this morning, the European Central Bank was out with its decision to hold interest rates steady, despite the fact that we are seeing cases continue to rise over there. Raises new questions about what other levers might be pulled, especially ahead of the Fed's decisions here next week. For more on that, I want to bring in Yahoo Finance's Fed reporter Brian Cheung with the latest in that thinking. Brian.

BRIAN CHEUNG: Well, Zack, a bit of a wait and see approach from the European Central Bank. Again, as you mentioned, as the coronavirus cases continue to go up across the eurozone, the ECB deciding earlier this morning to hold its deposit rates steady at negative 0.5%. Again, they have negative nominal rates over there on the other side of the pond.

Now the governing council of the ECB also held its pandemic bond buying program or their version of quantitative easing at the same pace right now, currently at $1.6 trillion. They reiterate that that program will run at least through June of 2021. So a little bit of forward guidance from the ECB there.

But again, both of those policy changes aren't any different from their previous meeting. So very similarly like the Federal Reserve, saying they want to kind of wait and see what happens here and put the ball really in fiscal policymakers' court to provide any sort of stimulus as the health implications continue to get more serious in that region.

However, it does appear to be the case that the ECB could be signaling some sort of stimulus package in December. What that might look like, a bit unsure, but some hints from Christine Lagarde, again, the president of the ECB, that it could boost the pace of its quantitative easing and its bond buying program if it needed to in that last meeting in December.

ZACK GUZMAN: Obviously, I mean, when we talk about the Fed and their decisions here, they're at the lower bounds. They have beaten back any idea of negative interest rates. So what are you expecting maybe more in the US policy focus here as we await that?

BRIAN CHEUNG: Well, very similar to what the ECB has already signaled. So the Federal Reserve will have its policy setting meeting next week Wednesday and Thursday. Usually these meetings are Tuesday, Wednesday. But because of the election, they push that back by one day. So we'll get the decision at 2:00 PM next Thursday.

The Federal Reserve likely to do the same thing. No big major changes are expected. At least, that's the chatter that I've heard on Wall Street. But what could be similar is them teeing up some sort of more aggressive bond buying program in the last meeting in December as well.

We've heard the likes of Chicago Fed president Charles Evans on this program here on Yahoo Finance, saying that they could provide more accommodation with the ramp-up of quantitative easing, maybe buying more assets or longer duration assets. But whether or not they deploy that next week is definitely a question. It's more likely that will probably be in December. But again, worth watching as we get into that meeting next Thursday.