Despite the strong recovery of the Eurozone economy, whose pil at the end of the year it should exceed livelli pre Covid, the ECB proceeds with extreme caution in the reduction of extraordinary aid launched last year to counter the effects of the pandemic. The Governing Council has in fact decided to leave it unchanged to zero interest rates and has announced one reduction the pace of purchases of securities under the Purchase program for the pandemic emergency (Pepp), but specified that it will be “moderate“. A choice that reassured them European stock exchanges, which opened lower and regained ground after the move. The president Christine Lagarde at the press conference he pointed out that “what we are doing is not a tapering (a gradual reduction of assets on the balance sheet, ed), we are recalibrating the Pepp which is an emergency program ”. Analysts agree that it was an accommodative move also because the door remains open to a new acceleration in the first quarter of 2022 should it be needed.
“Based on a joint assessment of financing conditions and inflation prospects”, the Board considered “that they can be maintained favorable financing conditions“Also” with a pace of net asset purchases moderately lower compared to the previous two quarters “. There is also no change in the views regarding bond purchases through the “old” program started in 2015 by Mario Draghi at a monthly rate of 20 billion euros. The purchases will proceed “for as long as it takes to reinforce the accommodative impact of rates”, and will end “just before interest rates begin to raise.”
For the Pepp, however, the desire to reach a total of interventions for 1,850 billion euros is confirmed by continuing at least until the end of March 2022 “And, in any case, until the critical phase is considered over linked to the coronavirus “. Confirmed the flexibility of purchases – both in terms of countries and in terms of duration and type – “in order to avoid a tightening financing conditions incompatible with the contrast of the downward effect of the pandemic on the expected inflation profile “. The Council reiterates the possibility – “if necessary” – of “not making full use of the budget” but also of “recalibrate it, if required, to preserve favorable financing conditions that contribute to countering the negative shock of the pandemic on the inflation profile ”.
The Eurozone economy “rebounded above expectations in the second quarter”, said Lagarde, “and is on the road to strong growth in the third” a trend that will lead it “to exceed pre-covid levels at the end of 2021. “. The economist reports the successes of the vaccination campaign with “the 70% of vaccinated adults “ but warns about the “spread of delta variant which so far has not imposed new lockdowns but can delay reopening “. As for inflation, after the + 3% in August in the Eurozone “we still expect increases in the autumn which will be followed by a decline next year”. The increases “reflect strong increases in oil prices, the cancellation of the VAT discount in Germany and the pressures from shortages of materials and equipment“. However, “in 2022 these factors should diminish”. Lagarde then communicated the new estimates “revised upwards by the macroeconomic staff of the ECB which see inflation at 2.2% in 2021, 1.7% in 2022 and 1.6% in 2023”. The ECB therefore sees the hikes as ‘temporary’ but if some elements were to be transferred to wages, he explains, “the pressure on prices could be more lasting”.
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