ECB: 5 key points from the press conference – ABN Amro

The European Central Bank (ECB) made no new policy announcements or changes in forward guidance at the April Governing Council meeting. There were, however, five interesting points from the press conference, Aline Schuiling, Sr. Economist at ABN Amro, reports.

Taper talk dismissed as premature

“No taper – ECB President Lagarde made it clear that the Governing Council had not discussed the phasing out of net purchases under the PEPP at the meeting as it was ‘premature’. This was in response to a question pointing out that a number of hawkish national central bank heads had recently signalled that they would be in favour of tapering purchases in the second half of the year. Her comments suggest that this is not a majority view in the Council.”

“Focus still on financing conditions – The Council reconfirmed ‘it’s very accommodative monetary policy stance‘ and expected ’purchases under the PEPP over the current quarter to continue to be conducted at a significantly higher pace than during the first months of the year. In our view there remains some confusion about what the ECB is trying to achieve. Chief Economist Philip Lane had suggested earlier that the aim was to return to December levels of the yield curve, but the latest remarks at the press conference and ECB purchase behaviour suggest that they are content to roughly stabilise yields.”

“Economic assessment unchanged – The ECB continued to judge that ‘progress with vaccination campaigns, which should allow for a gradual relaxation of containment measures, should pave the way for a firm rebound in economic activity in the course of 2021’. It repeated that ‘while the risks surrounding the euro area growth outlook over the near term continue to be on the downside, medium-term risks remain more balanced’. At the same time the ECB sounded more convinced that the rise in inflation was transitory and continued to assert that ‘underlying price pressures remain subdued in the context of significant economic slack and still weak demand’.”

“Eurozone ≠ US – She made it clear that the economy of the eurozone was not on the same ‘page’ as that of the US and therefore monetary policy would not move in tandem. Indeed, she signalled given the different outlook for the economy and inflation, the ECBs exit would likely significantly lag that of the US. We judge that the big difference between the outlook in the US compared to the eurozone is that the fiscal stance is far more aggressive in the former.”

“Call to speed up fiscal support – Indeed, the Governing Council strengthened its call for the Recovery Fund to become operational and therefore provide fiscal support without further delay. In our view, even assuming the funds are rolled out according to plan, the aggregate fiscal stimulus in the eurozone falls short in the sense that an output gap will remain in the coming years.”

==========

WikiFX, a global leading broker inquiry platform!

Use WikiFX to get free trading strategies, scam alerts, and experts experience!

╔════════════════╗

Android : cutt.ly/Bkn0jKJ

iOS : cutt.ly/ekn0yOC

╚════════════════╝