ECB: No change to its monetary conditions

Economist at UOB Group Lee Sue Ann assesses the latest ECB event (Thursday).

Key Quotes

“As expected, the European Central Bank (ECB) decided to reconfirm its very accommodative monetary policy stance.”

“Last month, the ECB said it was going to increase government bond purchases — though still within the planned envelope of EUR1.85tn until March 2022 — to address rising bond yields in the Eurozone. At the time, the ECB expressed concerns with borrowing costs rising sharply for Euro area governments before the economy has fully recovered from the coronavirus shock. Since the announcement, net purchases have gone up over the past couple of weeks in keeping with the stance at the March meeting to bring them forward as a containment measure against higher yields.”

“Overall, we think the ECB will remain cautious. There have been more hawkish members of the ECB expressing hopes that ECB will be able to unwind its stimulus program. But ECB President Christine Lagarde stressed that there was no discussion on phasing out purchases under the PEPP and the exchange rate comments also did not surprise. Going forward, how the pandemic and respective vaccination programs play out will be crucial.”

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