ECB: Accommodative stance expected to persist – UOB

Economist at UOB Group Lee Sue Ann assesses the latest ECB monetary policy meeting (Thursday).

Key Quotes

“The interest rate on the main refinancing operations and the interest rates on the marginal lending facility and the deposit facility will remain unchanged at 0.00%, 0.25% and -0.50% respectively.”

“The Governing Council will continue to conduct net asset purchases under the pandemic emergency purchase programme (PEPP) with a total envelope of €1,850 billion until at least the end of March 2022 and, in any case, until it judges that the coronavirus crisis phase is over. Based on a joint assessment of financing conditions and the inflation outlook, the Governing Council expects net purchases under the PEPP over the coming quarter to continue to be conducted at a significantly higher pace than during the first months of the year.”

“Net purchases under the asset purchase programme (APP) will continue at a monthly pace of EUR20bn.”

“Finally, the Governing Council will continue to provide ample liquidity through its refinancing operations.”

“To sum up, we continue to believe the ECB will have to remain highly accommodative for some time due to subdued economic activity held back by services, and the longer-term challenges related to the COVID-19 pandemic. The expected lifting of confinement measures and the associated rebound in activity could come under threat if the approved vaccines in the current vaccination rollout proved ineffective against new virus variants.”