ECB forecasts brighter outlook, but pledges to steady stimulus, keeps rate unchanged

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ECB forecasts brighter outlook, but pledges to steady stimulus, keeps rate unchanged

On Thursday, the European Central Bank, a Frankfurt-based monetary union for 19 EU member states, had raised its full-year growth projections, however, had pledged not to discontinue a steady flow of fiscal stimulus at least until Summer over frets that a tapering of monetary supports would lead to a sharp rise in borrowing costs, which in effect would stir up every potential to suffocate the pandemic-strained eurozone economy.

Aside from that, the European Central Bank had also projected a higher inflation in the 26-member eurozone throughout the year, largely mirroring a US Fed projection of a sharp pickup in inflation, nonetheless, unlike the US Federal Reserve, ECB had not signalled that a rise in inflation would be momentary, eventually stoking possibilities of a gradual rate hike alongside a withdrawal of fiscal supports.

ECB forecasts brighter outlook, but pledges to sharpen up stimulus-instruments

Besides, according to latest ECB policy meet, the European Central Bank had kept lending rate steady at 0.25 per cent and depository rate stood at -0.5 per cent, while ECB’s bond repurchase program, which had bought nearly all new bonds issued by the European Governments, would likely to gain further traction over coming months, said the ECB.

Nonetheless, media toplines had quoted a source familiar with the ECB’s bond repurchase program as saying that at least three ECB policymakers out of 25 members in Governing Council, had pushed for a reduction in the pace of bond repurchase program citing an inflation-surge.

Meanwhile, adding that a policy shift to taper off a €1.85 trillion Pandemic Emergency Purchase Program had not even been discussed in the meet, ECB President Christine Lagarde, a former IMF (International Monetary Fund) Chair, said in a press conference following the announcements, “We believe that the steady hand is actually the right response”.