Rates remain on hold as ECB chiefs anticipate easing of lockdowns
The European Central Bank (ECB) has restated its desire to minimise borrowing costs across the eurozone, suggesting it will continue its increased rate of bond buying until the EU is well on the road to recovery.
The bank confirmed on Thursday via a press conference that it has “decided to reconfirm its very accommodative monetary policy stance”. The ECB’s to policymakers said in a statement after the conference that “incoming information confirmed the joint assessment of financing conditions and the inflation outlook carried out at the March monetary policy meeting”.
Therefore, “the governing council expects purchases under the [pandemic emergency purchase programme] over the current quarter to continue to be conducted at a significantly higher pace than during the first months of the year”, the statement said.
The deposit rate held steady at -0.5% as the ECB reaffirmed its position that €1.85tn emergency bond-buying programme could be expanded or not fully utilised. Its decision would depend on the progress of its efforts to support a recovery in output and inflation.
Containment Measures
The bloc is hurting as EU countries deploy measures to stifle the high rate of infections. However, the rate of vaccinations is moving more quickly in a number of countries. So much so that economists are anticipating the possibility of a strong recovery if restrictions are eased next month.
Speaking at a press conference after the announcement, ECB president Christine Lagarde said: “While the recovery in global demand and sizeable fiscal stimulus are supporting global and euro area activity, the near-term economic outlook remains clouded by uncertainty about the pandemic.”
“The progress with vaccination campaigns, which should allow for a gradual relaxation of containment measures, should pave the way for a firm rebound in economic activity in the course of 2021,” Lagarde said.
Downside Risk
While the risks surrounding the euro area growth outlook over the near term continue to be on the downside, according to Lagarde, medium-term risks remain more balanced. The president of the ECB also said that the prospects for global demand were better – bolstered by the sizeable fiscal stimulus – and that the progress with the vaccination roll-outs are encouraging.
“On the other hand, the ongoing pandemic, including the spread of virus mutations, and its implications for economic and financial conditions continue to be sources of downside risk,” Lagarde added.