Publications

At today's monetary policy meeting, the ECB maintained rates at 4% for deposit facility and the main refinancing operations rate at 4.5%, aligning with market expectations.

Today's ECB policy adhered to broader expectations of maintaining the status quo on policy rates and quantitative tightening. After a remarkable streak of 10 consecutive rate hikes, the ECB's decision today to leave the three key ECB interest rates unchanged came as no surprise, in line with our expectations.

Our forecast still leans towards a further rate hike in September (reaching a terminal rate of 4% for the deposit rate); however, recent data weaknesses and ECB communications before and during the meeting have increased the likelihood of a potential pause and the possibility of no further hikes.

As expected, the ECB announced a moderate slower pace of net asset purchases under the PEPP for next quarter, as compared to that in the previous two quarters. The decision was taken by unanimity by the Governing council on the back of favourable financing conditions and slightly better inflation outlook

The ECB, as expected, left its benchmark interest rates and broader policy guidance unchanged, but surprised boldly by announcing a significant step up of asset purchases under the PEPP next quarter. The decision was a clear response to the recent increase in bond yields.

The European economy has begun the year immersed in a third wave of the pandemic which, although it is beginning to recede, will slow the recovery expected for this year.

The ECB announced a comprehensive package focused on new liquidity and additional asset purchases measures to support households and firms facing increasing uncertainty.

Libra, Facebook's proposed global digital currency, has disappointed, with several partners abandoning the initiative and severe rejection by countless authorities on both sides of the Atlantic.