European Central Bank Maintains Loose Monetary Stance

January 21, 2021

Having augmented the ECB’s Pandemic Emergency program (PEPP) of asset purchases by half a trillion euros and extending this “very accommodative” quantitative stimulus from mid-2021 to March of 2022 at its final policy review of 2020, the European Central Bank governing council left all quantitative and interest rate settings unchanged at its first meeting of 2021. A released statement enumerates current policy and forward guidance. The overnight deposit rate has been at minus 0.5% since a 10-basis point cut in September 2019.

Summing up the economic prospects, ECB President Lagarde’s introductory statement explains, “Output is likely to have contracted in the fourth quarter of 2020 and the intensification of the pandemic poses some downside risks to the short-term economic outlook. Inflation remains very low in the context of weak demand and significant slack in labor and product markets. Overall, the incoming data confirm our previous baseline assessment of a pronounced near-term impact of the pandemic on the economy and a protracted weakness in inflation.”

Copyright 2021, Larry Greenberg. All rights reserved. No secondary distribution without express permission.



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