ECB reaffirms that inflation is only temporary
The European Central Bank (ECB) confirmed on Thursday that interest rates will remain at the same level and its bond buying program will remain the same.
The ECB’s 0% interest rate remained unchanged, with the bank’s deposit rate remaining at -0.5%. The Pandemic Emergency Purchase Program (PEPP) remained at the same level of 1.6trn as the asset purchase program remained at 2 billion euros.
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Investors will remain interested in the duration of time the ECB will maintain financial stimulus.
“The Governance Council expects key ECB rates to remain at current or low levels. The inflation outlook will robustly converge to a level close to 2% within the forecast period, and such convergence will be the case. It’s always consistent. The ECB said in a statement.
Data reveals that eurozone inflation exceeds the bloc’s target by less than 2%.
The ECB has said in the past it had expected prices to rise this year, but the move is temporary.
Economists expected a zero change to occur despite rising levels of inflation.
During May, the central bank’s target level of inflation reached 2%, but there were concerns that prices could exceed acceptable levels.
Commenting on the ECB’s monetary policy statement and maintaining Dovish’s tone, Jesus Cabra Guisasola, Associate of ValidUS Risk Management, said: The current Pep will be buying at the fastest pace in the third quarter of 2021. ”
“Though there is a clear signal of optimism around the European economy after the picking up cases of vaccination and coronavirus calm. There is still uncertainty surrounding Eurolia and its recovery.”
“The pandemic leaves behind a legacy of high debt and weak balance sheets with an uneven recovery between the Southern and Northern European economies. Therefore, the ECB is committed to continuing its waiting monetary policy stance. Likes, don’t disrupt the fundraising market in the short term.”
“An environment in which the European economy recovers at various paces with inflation below the 2% target could weaken the euro. Nevertheless, there is a weak market consensus of one dollar over the coming months, and EurusD is stating that We were able to test 1.25, a level we haven’t seen since early 2018.”
