The European Central Bank (ECB) has kept the reference interest rates for its refinancing operations unchanged at 0%, while the deposit facility rate will continue at -0.50% and the loan facility rate at 0.25%.

What is relevant in this Thursday's statement has been that the ECB has first reported that it plans to

accelerate its rhythm of monthly purchases

under its PEPP emergency purchase program after having examined financing conditions and inflation forecasts.

"The Governing Council expects that purchases under the PEPP during the next quarter will be made at a significantly higher rate than during the first months of the year," stressed the body chaired by Christine Lagarde.

The increase in the rate of purchases is possible because the PEPP is a flexible program.

Its total volume of 1.85 trillion euros and its net purchase deadline (March 2022) has remained unchanged.

The ECB has justified its increase in the volume of purchases due to "market conditions" and with the aim of "preventing a tightening" of financial conditions that is "inconsistent" with counteracting the negative impact of the pandemic on the expected path of inflation.

Likewise, the central bank has made explicit that, if it can maintain favorable financing conditions without using the full package of 1.85 trillion, it will not be used in its entirety.

In the same way, if it is necessary to increase its amount, it will do so.

With respect to the rest of the instruments, the central bank will continue to make net purchases of assets under its standard program (APP) at a monthly rate of 20,000 million net "for as long as necessary."

The ECB will reinvest funds from debt that is due for a "long" period of time after interest rates start to rise.

Lastly, the monetary authority has indicated that it will continue to provide "ample liquidity" through its refinancing operations, especially through the third program of long-term refinancing operations with a specific objective (TLTRO-III).

Inflation forecast

The euro zone economy will grow this year at a rate of 4%, one tenth more than expected last December, although in 2020 the rebound

will be 4.1% instead of the 4.2%

previously estimated, while that the bloc's inflation rate will accelerate as a consequence of "temporary" factors this year and the next, according to Christine Lagarde, president of the European Central Bank (ECB).

Specifically, the central bank expects that the inflation rate in the euro area will stand at

1.5%

in 2021

, compared to the 1%

forecast last December, while a year later prices will rise by 1.2 %, one tenth more than previously expected.

Looking ahead to 2023, the ECB's macroeconomic projections remain unchanged from the forecasts announced in December 2020, with GDP growth of 2.1% and an inflation rate of 1.4%.

"While the general economic situation is expected to improve throughout 2021, uncertainty persists around the short-term economic outlook, related in particular to the dynamics of the pandemic and the speed of vaccination campaigns," he said. Lagarde pointed out in the press conference after the meeting of the Governing Council of the ECB.

"In general,

the risks surrounding the growth prospects for the euro area in the medium term have been balanced

, although downside risks persist in the short term," the central banker warned.

Thus, while, on the one hand, the better prospects for global demand, driven by significant fiscal stimulus, and progress in vaccination campaigns are encouraging, on the other hand, the ongoing pandemic, including the spread of Mutations of the virus, and their implications for economic and financial conditions remain sources of downside risk.

In any case, Lagarde has reiterated that the available information confirms that a wide degree of monetary accommodation is necessary to sustain economic activity and the convergence of inflation towards the ECB's goal, at lower levels, but close to 2% in the medium term. term.

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