Christine Lagarde, President of the European Central Bank, addresses European legislators during a plenary session in the European Parliament in Brussels on 8 February 2021.
Olivier Matthys | AFP | Getty Images
LONDON – The European Central Bank decided on Thursday to leave its policy unchanged as market players look for clues as to when its massive monetary stimulus could be phased out.
“The Governing Council has decided to reconfirm its very accommodative monetary policy stance,” the ECB said in a statement on Thursday.
Christine Lagarde, President of the European Central Bank, will answer questions after the last meeting at 2.30 pm local time.
The central bank said last month it would increase government bond purchases – although still within the planned envelope of 1.85 trillion euros ($ 2.2 trillion) through March 2022 – to address rising eurozone bond yields. At the time, the ECB expressed concern about the sharp increase in financing costs for euro area governments before the economy fully recovered from the coronavirus shock.
As a result, Deutsche Bank data showed that the ECB bought EUR 74 billion in bonds in March, against EUR 53 billion and EUR 60 billion in February and January.
“The Governing Council expects purchases below the PEPP to continue at a significantly faster pace in the current quarter than during the first months of the year,” the ECB said Thursday, suggesting it will continue to buy more bonds in the coming months. compared to the first months of the year.
Eyes on June
Market participants eagerly anticipate the June meeting, the next on the ECB’s calendar, as the next key moment for monetary stimulus in the eurozone.
Hawk-like ECB members are hoping that as vaccination rates soar and economies slowly reopen, they can start talking about when to cut the stimulus. However, this will depend on the course of the pandemic and the respective vaccination programs. Many European countries have been forced to return to strict coronavirus locks after a third wave of infections over the Easter period.
The ECB said on Thursday that it will all depend on how financing conditions evolve.
“The envelope can be recalibrated if necessary to maintain favorable financing conditions to help counteract the negative pandemic shock on the inflation path,” the ECB said in a statement.
The ECB’s policy mandate is to keep inflation close to but below 2%. Current forecasts estimate that inflation will peak at 2% in the last quarter of 2021, but decline over the course of 2022.
The market reaction was muted after the announcement as it met analysts’ expectations that no further action would be taken.
In March, the ECB forecasts a GDP (gross domestic product) rate for 2021 of 4% and of 4.1% for 2022.