ECB seen ‘on hold’ until end of 2021 – UOB

Economist Lee Sue Ann at UOB Group reviewed the developments from the latest ECB meeting.

Key Quotes

“In its first monetary policy decision of the year, the European Central Bank (ECB) kept interest rates unchanged – the main refinancing operations, as well as interest rates on the marginal lending facility and the deposit facility at 0.00%, 0.25% and -0.50% respectively. The ECB also maintained its asset purchase programme (APP) at a monthly pace of €20 billion.”

“The ECB also launched the long-awaited Monetary Strategy Review, the first one since 2003, and one of the first moves announced by ECB President Christine Lagarde upon starting her tenure. It was hardly impressive, though and the details were disappointingly thin. Aimed to be completed by December 2020, Lagarde said the ECB would reconsider the inflation target that defines its core price-stability mandate, along with the effectiveness and potential side-effects of the tools used to achieve it. The framework also set up a battle over how much central banks should do to tackle climate change by promising to examine “how other considerations, such as financial stability, employment and environmental sustainability, can be relevant in pursuing the ECB’s mandate.”

“Given the continued softness in the Eurozone economy, and the exceptional extent of monetary policy measures already in place, we expect the ECB to keep its policy rates and asset purchase programme (APP) unchanged through end-2021.”