The board of directors held this Thursday kept the reference interest rate unchanged and strengthened its commitment to accelerate the pace of purchases.
Compared with March, the European Central Bank is more optimistic about the evolution of the Eurozone economy. The new forecasts for 2021 and 2022 have been revised upwards, and the agency headed by Christine Lagarde now predicts in the basic scenario that the euro economy will grow by 4.6% in 2021, compared to the previous forecast 4.0%. Next year, the expected increase in gross domestic product (GDP) is now 4.7%, compared with the 4.1% forecast in March. Compared with March, the agency led by Christine Lagarde’s forecast for 2023 remains unchanged, indicating a GDP growth of 2.1%.
The European Central Bank’s expectation is that “strong improvement will occur in the second half of 2021, as the progress of the vaccination campaign allows continued demobilization measures to contain the pandemic”. Lagarde believes that the recovery in the coming months will be driven by greater domestic and global demand and measures to support member countries’ monetary and fiscal policies.
The European Central Bank said that if global demand increases and household savings will decline “as soon as social and travel restrictions are lifted,” then the euro zone’s growth may be higher than 4.6%. As a risk factor for the expected recovery, “the spread of the virus mutation and its impact on economic and financial conditions” was pointed out.
As for inflation, the European Central Bank emphasized an increase from 1.3% in March to 2.0% in May, but attributed this evolution to cyclical factors, namely energy prices and problems in the industry’s supply chain. For example, in terms of chip supply, this affects computer and car manufacturers, etc. In answering reporters’ questions, Lagarde said that he believes that “some bottlenecks will gradually dissipate. This is a response to the offer,” he said.
He said that taking into account the economic slowdown and the appreciation of the euro, price pressures will be controlled. “We have not seen a rise in service prices and wages have not risen sharply,” Lagarde said, referring to the level of unemployed and still working workers. lay off In various countries (15%).
The European Central Bank forecasts an inflation rate of 1.9% this year (1.5% in March), 1.5% next year (previously forecast 1.2%) and 1.4% in 2023. The upward revisions to 2021 and 2022 are related to previous estimates and are explained by such temporary factors. Taking into account the expected decline in energy prices, the forecast inflation rate for 2023 remains unchanged.
The European Central Bank kept key interest rates unchanged and announced that “they will remain at current levels or lower until the inflation outlook strongly converges to levels close to but below 2% throughout the year.” Forecast horizon.
The President of the European Central Bank also announced that the institution will continue to purchase assets under the Pandemic Emergency Purchase Program (PEPP), “at least until the end of March and before 2022, the total amount will be 1.85 billion euros, in either case, until the governor of the board of directors judges The coronavirus crisis is over.”
When asked by reporters about the possibility of extending the emergency procurement plan beyond 2022, Lagarde bluntly said: “Any discussion about the withdrawal of PEPP is too early, too early, it’s that simple.” He promised. , “The council has not yet discussed longer-term issues.”