Euro Area: ECB keeps ultra-loose monetary policy unchanged in April

Euro Area Monetary Policy April 2021

Euro Area: ECB keeps ultra-loose monetary policy unchanged in April

At its meeting on 22 April, the European Central Bank (ECB) kept rates on the main refinancing operations, the marginal lending facility and the deposit facility at their respective all-time lows of 0.00%, 0.25% and -0.50%, and it left the total amount of its stimulus measures unchanged. Meanwhile, the Bank stated that it expects net asset purchases under the pandemic emergency purchase program (PEPP) to be substantially higher in the second quarter than in Q1, in order to prevent financing conditions from tightening and sustain the recovery.

The economy likely contracted again in Q1, as household spending and the tertiary sector were seemingly weighed down by a tightening of Covid-19 containment measures throughout the currency union. Meanwhile, inflation rose to an over one-year high in March, although the Bank ascribed the acceleration to transitory factors such as higher energy prices. The short-term outlook remains surrounded by uncertainty stemming from ongoing Covid-19 restrictions amid persistently high infection rates and sluggish vaccine rollouts. That said, progress in vaccination efforts and the eventual easing of restrictions, together with sizable fiscal and monetary stimulus and a brightening global backdrop, should fuel the recovery in the medium term.

Against this backdrop, the Bank reiterated that “an ambitious and coordinated fiscal stance remains crucial” to help the recovery, and that fiscal measures must “remain temporary and targeted in nature”. The ECB once again highlighted how critical the implementation of productivity-enhancing structural policies will be to raise potential growth and increase economic resilience.

Commenting on the latest decision and possible future moves, Carsten Brzeski, chief Eurozone economist at ING, noted:

“Today’s meeting was never expected to be a killer one anyway. Instead, expect the June meeting to be very exciting. If the more optimistic projections for the vaccination rollout really materialise […] some 50% of all eurozone citizens could have had a first jab when the ECB meets next, on 10 June. If this is the case, the next batch of staff projections could show an upward revision to the growth forecasts and a confirmation of the economic recovery in the second half of the year. Combined with a further acceleration of inflation (forecasts) on the back of higher input prices and the German VAT reversal, there will be sufficient ingredients at the June meeting to have a serious discussion about the timing of tapering.”

Free sample report

Access essential information in the shortest time possible. FocusEconomics provide hundreds of consensus forecast reports from the most reputable economic research authorities in the world.
Close Left Media Arrows Left Media Circles Right Media Arrows Right Media Circles Arrow Quote Wave Address Email Telephone Man in front of screen with line chart Document with bar chart and magnifying glass Application window with bar chart Target with arrow Line Chart Stopwatch Globe with arrows Document with bar chart in front of screen Bar chart with magnifying glass and dollar sign Lightbulb Document with bookmark Laptop with download icon Calendar Icon Nav Menu Arrow Arrow Right Long Icon Arrow Right Icon Chevron Right Icon Chevron Left Icon Briefcase Icon Linkedin In Icon Full Linkedin Icon Filter Facebook Linkedin Twitter Pinterest