European Central Bank Not as Hawkish as Feared

April 14, 2022

At this week’s meeting of the European Central Bank Governing Council, policymakers as expected speeded up the planned wind-down of monthly asset purchases, but the overall tone of the decision reads less hawkishly than expected. Planned asset purchases had previously been set at EUR 40 billion per month all this quarter and at EUR 30 billion per month in 3Q; now the purchases will decline from EUR 40 billion in April to 30 billion euros next month, 20 billion euros in June and be phased out entirely in 3Q. But the statement recommits to reinvesting maturing PEPP principals through all of 2024, stresses that policy decisions going forward will adhere to principles of “optionality, gradualism, and flexibility.” and does not seem to be in a hurry to raise interest rates of a -0.50% deposit rate, a zero percent refinancing rate and a MLF rate of 0.25%.

Copyright 2022, Larry Greenberg. All rights reserved. No secondary distribution without express permission.

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