The ECB maintains stimuli at a “moderate pace” in the face of rising prices


The European Central Bank maintains its policy unchanged, in case it announces a “moderation” in its pace of asset purchases, and resists pressure to announce a rise in interest rates, although it admits that inflation is being higher than expected. provided.


The ECB reduces "moderately" economic stimuli in the face of rising inflation and recovery

The ECB reduces economic stimuli “moderately” in the face of rising inflation and recovery

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Thus, the ECB foresees “the stabilization of inflation at 2% in the medium term, which may imply a transitional period in which inflation is moderately above that level”.

Analysts consulted by Reuters predict that a price increase could reach 4%, double the ECB’s target this year, and will likely recede more slowly than the ECB has acknowledged. Even if temporary, such a price increase can fuel underlying price pressures and, if prolonged, affect wages.

Higher energy prices can also force companies to adjust their pricing behavior to account for higher costs.

It is expected that in December the ECB may decide to end the emergency stimulus next March, but could draw up another support plan to take over and keep borrowing costs low.

Meanwhile, the ECB will continue to make asset purchases under the Pandemic Emergency Program (PEPP) with a total endowment of € 1.85 trillion “at least until the end of March 2022 and, in any case, until it considers that the crisis phase of the coronavirus is over. ” And he adds: “The Governing Council continues to consider that favorable financing conditions can be maintained with a purchase rate slightly lower than in the second and third quarters of this year.”

Thus, the ECB “will make purchases flexibly in accordance with market conditions and with a view to avoiding a tightening of financing conditions that is incompatible with the objective of counteracting the negative impact of the pandemic on the projected inflation path. If favorable financing conditions can be maintained with asset purchase flows that do not deplete the PEPP endowment during the program’s net purchase horizon, it will not be necessary to use its endowment in full. Also, this endowment can be recalibrated if necessary to maintain favorable financing conditions that help to counteract the negative impact of the pandemic on the path of inflation “.

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