The ECB confirms that interest rates remain the same
As expected, the European Central Bank (ECB) confirmed on Thursday that its interest rates remain the same at 0.5%.
The ECB also expects purchases under the Pandemic Emergency Purchase Program (PEPP), a bond purchase stimulus package, will be “introduced at a significantly higher pace” in the next quarter, to contain rising bond yields. He said that
Bond purchasing programs have the effect of pushing down bond yields. This serves as a benchmark for renting the entire region.
The ECB also said in a statement today that it would “prevent tightening of funding terms to ensure that you can buy flexibly depending on the market situation and prevent it from contradicting the downward impact of the pandemic.” “I’ll be flexible in purchasing to get it.”
The pound jumped to 1.679 against the euro shortly after the news broke, with the euro below 1.9450 against the dollar.
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German bond yields are considered a benchmark for the region, and fell sharply as news of ECB bond purchases were destroyed, similar to Italian bond yields.
Christine Lagarde took the central stage in Frankfurt, Germany, as the ECB president provided an estimate of the reasons behind the policy announcement and the eurozone economic situation.
The former IMF chief warned against rising bond yields as a risk to funding conditions and confirmed it as a cause of the ECB’s policy announcement.
Lagarde confirmed that the high COVID-19 infection rates and lockdowns are undermining growth, and said the overall economic situation will improve.
The ECB president said the eurozone is likely to sign for this reason in the fourth quarter of 2020 and first quarter of 2021. She also confirmed growth forecasts of 4%, 4.1% and 2.1% in 2021, 2022 and 2023, respectively.
Commenting on the ECB’s bond purchasing program, Rupert Thompson, Chief Investment Officer of Kingswood, said:
“The European Central Bank plans to increase the pace of bond purchases over the coming months to prevent tightening of funding conditions amid the recent rise in government bond yields.”
“This move didn’t need to expand the size of the 1.85TRN quantitative mitigation program, as the ECB is running until next March and already gives it the scope to buy one troll bond. The action comes amidst the backdrop of a disappointing, disappointing slow vaccine rollout that is slowing the eurozone economic recovery, and the region’s fiscal stimulus packages are also considerably smaller than the currently ongoing fiscal stimulus packages in the US .”
