European Central Bank: No Policy Changes Now But Maybe in December

October 28, 2021

The ECB kept its interest rate structure (a zero percent refinancing rate flanked by a -0.5% deposit rate and a 0.25% marginal lending facility rate) and didn’t change the quantitative elements of monetary stimulus, either. The Governing Council concedes that inflation will likely take longer to retreat into its target but expressed continuing confidence that the spike in prices reflects temporary factors and that a very stimulative stance is required to ensure that the target is not undershot in the long run. The full description of future policy remains as follows, yet analysts continue to anticipate that quantitative support will be throttled back by 2Q 2022.

In support of its symmetric two per cent inflation target and in line with its monetary policy strategy, the Governing Council expects the key ECB interest rates to remain at their present or lower levels until it sees inflation reaching two per cent well ahead of the end of its projection horizon and durably for the rest of the projection horizon, and it judges that realized progress in underlying inflation is sufficiently advanced to be consistent with inflation stabilizing at two per cent over the medium term. This may also imply a transitory period in which inflation is moderately above target.

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


Comments are closed.