The ECB closes the course with optimism. It revises its growth forecast in the euro zone upwards and announces a GDP of 4.6% in 2021 and 4.7% in 2022, significantly above the expected 4% and 4.1%, respectively. As for inflation, he estimates a price increase of 1.9% in 2021 and 1.5% in 2022. After the “economic cataclysm of the pandemic”, in the words of the president of the European entity, Christine Lagarde , these data make up a hopeful landscape. But even so, the time has not come to withdraw the stimuli, far from it.
The ECB not only maintains unchanged interest rates, general and negative zero rate of -0.5% for the deposits that banks make in their accounts, but will also continue with its debt purchases at an accelerated rate in the third quarter of the year, as a measure to sustain the recovery of economic activity. The emergency program (PEPP), launched at the beginning of the pandemic, will cover 1.85 trillion euros until 2022. “We expect that net purchases during the quarter will continue to be made at a significantly higher rate than during the first months of 2021.” Lagarde explained, “We will do so in the next three months according to market conditions, which clearly include seasonality. Let us remember that the fundamental attribute of PEPP, which is flexibility ”.
The reason that the ECB is keeping its respirator on the euro economy is that “we spent a lot of time looking at the quarterly projections and we delved into each and every one of the elements. I could say that we were somewhat more optimistic about the economic outlook than we were three months ago. ” «The last signal we are receiving is a strong rebound in the second quarter and we expect it to amplify in the third quarter, “he said, but adding that” we also look at bottlenecks on the supply side … which will undoubtedly create some headwinds, “referring to supply shortages, such as in the supply of semiconductors and chips, which may slow down the recovery of the European industry.
“All the key points of the introductory statement have been agreed and considered acceptable by all members,” Lagarde boasted at the beginning of the press conference after the meeting of the governing council, although he acknowledged that “we debate, and that is The good thing that we are together, we debated whether it was right to really move from this slight downside risk that we had in March to a more balanced assessment… and there was no general consensus on that. “There was a debate on the rhythm of the purchase, on some of the analytical aspects of the use of our instruments”, has abounded on the internal discussion, “that is why I used the words ‘widely agreed’ by the governing council. There were here and there a couple of divergent points of view and there was no unanimous consent in all areas.
The markets are eager to start receiving clues about the inflection point of this policy, given that growth is underway, inflation worries countries like Germany and the vaccination campaign already allows us to think about a return to a certain normality, but Lagarde He has disappointed on this point and has limited himself to saying that “no type of transition, exit, whatever you call it has been discussed,” hinting at a certain disgust at the insistent interest. «Any discussion about the exit of the PEPP would be premature, too soon and it will come in due time, but certainly for the moment it is too early and premature, that simple ”, has settled the question.
Regarding inflation, lagarde has drawn attention to the fact that “there is also the movement of core inflation, we are clearly seeing an improvement and that goes back to December.” “We assume that some of the bottlenecks that we know, some of those bottlenecks will gradually be eliminated,” he reassured. “We are seeing some improvement in the inflation figure and our assessment for 2021 is 1.9%, which is clearly north of our last projection,” he insisted, also justifying himself in the fact that “we do not see that they rise much the prices of services … and that is because wages have not increased significantly. We may see a little more movement, and we hope to see more.
Lagarde now takes the members of the ECB’s governing council, between June 18 and 20, to a three-day retreat in which they will focus on the review of the entity’s strategy, a reform that had to be postponed due to the pandemic and that it wants to relaunch as soon as possible.