European Central Bank President Christine Lagarde addresses European legislators during a plenary session of the European Parliament in Brussels on 8 February 2021.
Olivier Matthys | AFP | Getty Images
LONDON – The European Central Bank on Thursday decided to keep its policy unchanged as market players look for clues as to when their massive monetary stimulus could begin to be settled.
“The Governing Council decided to reconfirm its very accommodative monetary policy stance,” the ECB said in a statement on Thursday.
European Central Bank President Christine Lagarde will answer questions after the last meeting at 2.30pm local time.
The central bank said last month that it would increase purchases of government bonds, even if it remained within the expected endowment of 1.85 trillion euros ($ 2.2 trillion) until March 2022, for cope with rising bond yields in the eurozone. At the time, the ECB expressed concern that borrowing costs would rise sharply for eurozone governments before the economy fully recovers from the coronavirus shock.
As a result, data from Deutsche Bank showed that the ECB acquired bonds for 74 billion euros in March, compared to 53 billion and 60 billion euros in February and January.
“The Governing Council expects purchases under the PEPP during the current quarter to continue at a significantly higher rate than in the first months of the year,” the ECB said on Thursday, suggesting it will continue to buy better bonds in the coming months. compared to the first months of the year.
Eyes in June
Market participants are eagerly anticipating the June meeting, the next on the ECB’s calendar, as the next key moment for monetary stimulus in the euro area.
Sickle ECB members hope that as vaccination rates rise and economies slowly reopen, they can start talks on when to calm the stimulus. However, this will depend on how the pandemic and their respective vaccination programs develop. Many European nations have been forced to return to strict coronavirus blockades after a third wave of infections during the Easter period.
The ECB said on Thursday that everything would depend on changes in financing conditions.
“The envelope can be recalibrated if required to maintain favorable financing conditions to help offset 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 will fall throughout 2022.
The market reaction was silenced after the announcement, as it met analysts ’expectations of not taking any further action.
The ECB forecast a GDP (gross domestic product) rate of 4% in March and 4.1% for 2022 in March.