ECB: “Lower for longer” re-affirmed – UOB
|Lee Sue Ann, Economist at UOB Group, reviews the latest ECB event.
Key Takeaways
“What was supposed to be a non-event July monetary policy meeting at the European Central Bank (ECB), turned into a key focus point of the week following the release of its strategic review, where the Governing Council agreed a symmetric inflation target of two per cent over the medium term. As expected, the ECB, on Thursday (22 July), revised its forward guidance on rates, taking a more dovish stance.”
“The Governing Council also confirmed its other measures to support its price stability mandate, namely the level of the key interest rates, its purchases under the asset purchase programme (APP), its reinvestment policies and its longer-term refinancing operations.”
“The latest decision reinforces our view that 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. While not a discussion at this juncture, the ECB’s dovish bias would suggest that the total reduction of the monthly purchases in 2022 will be less than previously expected, pushing out any speculation on tapering.”
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