ECB Decision of April 2021

The President of the European Central Bank, Christine Lagarde, addresses the MEPs during the plenary session of the European Parliament in Brussels, on February 8, 2021.

Olivier Matthys | AFP | Getty Images

LONDON – The European Central Bank decided on Thursday to keep its policy unchanged, while market players are looking for indications when its massive monetary stimulus could start to be lifted.

“The Governing Council has decided to reaffirm its highly flexible monetary policy stance,” the ECB said on Thursday.

European Central Bank President Christine Lagarde will answer questions after the latest meeting at 14:30 local time.

The central bank said last month that it would increase purchases of government bonds – although still within the planned 1.85 trillion euros ($ 2.2 trillion) by March 2022 – to address 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 recovered from the coronavirus shock.

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

“The Governing Council expects PEPP purchases to continue at a much faster pace during the current quarter than during the first months of the year,” the ECB said on Thursday, suggesting it would continue to buy more bonds in the coming months compared to the first few. months of the year.

Eyes in June

Market participants are eagerly awaiting the June meeting, the next in the ECB’s calendar, as the next key moment for monetary stimulus in the euro area.

The Hawkish members of the ECB hope that, with the rise in the vaccination rate and the slow opening of the economies, they will start talks on when to ease the stimulus. However, this will depend on the way the pandemic unfolds and the appropriate vaccination programs. Many European nations have been forced to return to severe coronavirus blockades after a third wave of infections during the Easter period.

The ECB signaled on Thursday that it would all depend on how developments and financing conditions develop.

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

The ECB’s 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 that it will fall during 2022.

The reaction in the market was dampened after the announcement, because it met the expectations of analysts about further action.

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