The European Central Bank raised its growth and inflation outlooks on Thursday (10/06/2021) but promised to keep ample stimulus flowing, fearing that a retreat now would accelerate a worrisome rise in borrowing costs and choke off recovery.

It resisted calls from some policymakers to start reining in its monetary stimulus as the eurozone economy recovers from the impact of the coronavirus pandemic, and kept its main policy measures unchanged in its latest statement.

It said: “Based on a joint assessment of financing conditions and the inflation outlook, the governing council expects net purchases under the [pandemic emergency purchase programme (PEPP)] over the coming quarter to continue to be conducted at a significantly higher pace than during the first months of the year.”

ECB President Christine Lagarde said policymakers agreed to make further emergency purchases over the next quarter "at a significantly higher pace" than during the first months of the year" but gave no further detail about the expected levels.

"We are going to do that in next three months according to market conditions, which clearly include seasonality," she told a news conference, referring to the typically lower levels of liquidity in Europe's summer months.

"The conclusion that we reached (on policy approach), I would say 'steady hand'"

Markets plunge after ECB and EU fail to convince

 

Summary of President Lagarde's comments - in headlines:

When analyzing inflation, we must focus on services.

Wages in the service sector are not rising significantly.

We don't see much of a rise in service prices.

We're still a long way from our ultimate inflation goal.

PEPP bond buying will be based on market conditions, taking seasonality into consideration.

It's too early to talk about long-term challenges.

It's too early to talk of reducing bond purchases.

PEPP exit talks to arrive in due time, but it's too early now.

The ECB to publish two scenarios for the economic outlook.

Through supply response, some bottlenecks can eventually fade away.

PEPP's speed was a point of contention.

In mid-July, The ECB is to decide on giving the go-ahead for the digital euro exploration phase.

The US and Euro-area economies are in different situations.

Fiscal stimulus has been lower in the eurozone.


ECB Oil Price Forecasts:

ECB forecasts assume the 2021 oil price of $65.80/barrel.

ECB forecasts assume the 2022 oil price of $64.60/barrel.

ECB forecasts assume the 2023 oil price of $61.90/barrel.