ECB Decision April 2021

Christine Lagarde, President of the European Central Bank, addresses European lawmakers at 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 while market players look for clues when its huge monetary stimulus could begin to break down.

“The Governing Council has decided to reaffirm its very accommodating stance on monetary policy,” the ECB said in a statement on Thursday.

Christine Lagarde, president of the European Central Bank, will answer questions after the latest meeting at 2.30pm local time.

The central bank said last month that it would increase its purchases of government bonds – although still within the planned envelope of 1.85 trillion euros ($ 2.2 trillion) until March 2022 – to offset the rising bond yields in the eurozone to speak. At the time, the ECB expressed concern about borrowing costs, which rose sharply for eurozone governments before the economy fully recovered from the coronavirus shock.

As a result, Deutsche Bank data showed that the ECB bought 74 billion euros in bonds in March, up from 53 billion and 60 billion in February and January.

“The Governing Body expects purchases under the PEPP to take place at a significantly higher rate during the current quarter than during the first months of the year,” the ECB said on Thursday, suggesting that it continue to buy more bonds in the coming months. . compared to the first few months of the year.

Eyes on June

Market players expect the June meeting, the next in the ECB calendar, as the next important moment for monetary stimulus in the eurozone.

Hawkish members of the ECB hope that as vaccination rates rise and economies slowly reopen, they can start talking about the stimulus. However, it will depend on how the pandemic and various vaccination programs play out. Many European countries have been forced to return to severe coronavirus closures after a third wave of infections during Easter.

The ECB indicated on Thursday that it would all depend on how the financing conditions also develop.

“The envelope may be recalibrated if necessary to maintain favorable financing conditions to counteract the negative pandemic shock against the path of inflation,” the ECB said in a statement.

The ECB’s policy mandate is to keep inflation close, but below 2%. Current forecasts estimate that inflation will peak at 2% in the last quarter of 2021, but will decline during 2022.

The reaction to the market was muted after the announcement because it did not meet analysts’ expectations of any further action.

In March, the ECB forecast a GDP (gross domestic product) rate for 2021 of 4% and 4.1% for 2022.