ECB meeting provides clearer outlook

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The meeting of the Governing Council of the European Central Bank (ECB) took place on Thursday 10 June 2021 and provided a clearer outlook for the future development of the economy, especially of the 19 eurozone countries. Investors on the international foreign exchange – Forex market reacted to this fact, and on 11 June at 7:46 am CET the global currency pair EUR/USD traded at the mutual exchange rate  US$ 1.219 per EUR with the daily strengthening of the EUR by +0.16% against the USD.

Immediately after the meeting of the Governing Council, the President of the EU Central Bank, Christine Lagarde, commented on the ECB’s decisions at a press conference, and provided answers to journalists’ questions, which resulted in the following: the interest rate on the main refinancing operations and the interest rate for the overnight loan and overnight facility will remain unchanged at 0.00%, 0.25% and -0.50%. The Governing Council expects key ECB interest rates to remain at current or lower levels until the inflation outlook converges strongly to a level close enough but below 2% over its projection horizon. This convergence is firmly reflected in the underlying inflation rate.

The Governing Council will continue to purchase net assets under the Pandemic Emergency Purchasing Program (PEPP), worth € 1,850 billion, at least until the end of March 2022. Based on a joint assessment of financing conditions and inflation outlook, the Governing Council expects net purchases under the PEPP to continue at a significantly higher pace in the next quarter than in the preceding first months of this year. The Governing Council will keep purchasing assets in order to avoid tightening financing conditions. In addition, the flexibility of purchases over time, across asset classes and between jurisdictions will continue to support the smooth transmission of monetary policy.

Net purchases under the Asset Purchase Program (APP) will continue at a monthly rate of €20 billion. The Governing Council expects that these monthly purchases will run for as long as necessary to reinforce the accommodative impact of its interest rates, and that it will end shortly before the key ECB interest rates increase begins. The Governing Council is ready to adjust all its instruments as necessary to ensure that inflation is directed towards its target in a sustainable manner. Based on these facts, analysts predict that the EUR will be trading at US$ 1.2 per EUR or higher.