No tapering - just a slight slowdown. As expected by the market, the European Central Bank has announced that it will bring purchases of securities linked to the PEPP (the extraordinary program launched to deal with the effects of the pandemic) to a level "moderately lower than in the previous two quarters". But the overall financial envelope of the program remains confirmed (1.850 billion), as well as the deadline, which will not arrive before the end of March 2022 (further extensions remain possible if the Eurotower "does not consider the critical phase linked to the coronavirus to be over").
The number one of the ECB, Christine Lagarde, explained that the central bank "is only recalibrating" its instruments, as it had "already done in December and March". For this reason it is improper to speak of tapering (the operation which would progressively close the taps in Frankfurt, reducing purchases of securities until they are eliminated).
INTEREST RATES
Furthermore, in the statement released at the end of the Governing Council, the ECB reiterates that it will not raise interest rates "until it sees inflation reach 2% well before the end of its projection horizon and in a lasting manner" and that they are possible transitory overruns upwards.
Consequently, rates remain at zero on the main refinancing operations, at 0,25% on the marginal refinancing operations and at -0,50% on deposits in the ECB.
THE “TRADITIONAL” QE
Finally, the Central Bank confirmed that the APP securities purchase programme, i.e. quantitative easing launched well before the pandemic, will continue at a rate of 20 billion a month
LAGARDE: "THE ECONOMY COULD EXCEED EXPECTATIONS"
On the macro front, Lagarde added that the euro area economy has made progress recently: the set of risks appears "balanced and activity could exceed expectations, while savers could save less than expected" and spend more more.
GDP FORECASTS IMPROVE
Meanwhile, the ECB has raised its forecasts for growth in the Eurozone in 2021 to +5%, filed that for 2022 to +4,6% and confirmed that for 2023 at +2,1%.
THE OUTLOOK FOR INFLATION
Not only that: the Eurotower has also revised upwards its inflation forecasts for the euro area, bringing them to 2,2% for this year, 1,75% for the next and 1,5% for next year. 2023. The estimates published in June were 1,9, 1,5 and 1,4%, respectively.
In any case, Lagarde stressed that "in the medium term, inflation is expected to remain well below the ECB's target".
