ECB: Lagarde, expected solid rebound of the economy in the course of 2021

• Lagarde: "The ECB has a whole battery of exceptional tools to use"

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22 April 2021 Economic data, the results of economic surveys and the high frequency indicators received indicate a

protracted economic weakness

for the first quarter of 2021

, attributable to the persistence of the pandemic and the associated containment measures.

Therefore, real GDP is likely to contract further in the first quarter of the year.

ECB President Christine Lagarde said at a press conference in Frankfurt, adding that a recovery is expected in the second quarter. Despite the forecasts of an improvement in the overall economic situation in 2021 and the ongoing fiscal support, "uncertainty continues to characterize the short-term economic prospects, in particular as regards the dynamics of the pandemic and the speed of vaccination campaigns".

The rise in inflation, Lagarde said, is due to "temporary factors" and, "looking ahead, the vaccination campaigns underway, together with the gradual easing of containment measures, fuel expectations of a decisive recovery in activity. economic in the course of 2021 ". 

ECB confirms expectations

As expected. The Governing Council of the ECB reaffirmed the total endowment of the Pepp pandemic crisis purchase program at 1,850 billion euros, whose maturity is in turn maintained "

at least until the end of March 2022

" and, "in any case, until the critical phase linked to the coronavirus will not be concluded ".

At the same time, the Board reiterated that it expects Pepp purchases to be conducted "at a significantly faster pace" in the current quarter than in the first months of the year. And he also reiterated the flexibility on conducting these operations. Then there remains the formula on "if favorable financing conditions can be maintained through asset purchase flows that do not exhaust the budget over the horizon of the net Pepp purchases, it will not be necessary to make full use of the budget. Similarly, this can be recalibrated, if required, to preserve favorable financing conditions ".

The Board also confirmed the level rate on main refinancing operations at zero, which is an all-time low, as well as at 0.25% the rate on marginal lending operations and at minus 0.50% the rate on deposits with the bank. central.

The ECB also reiterates the "foward guidance", the indications on the future prospects of monetary policy which envisage that rates "remain at or below current levels until the inflation prospects converge firmly on a sufficiently close but lower level. at 2% "in its forecast horizon. The ECB concluded by reiterating that it will continue to provide abundant liquidity through its refinancing operations to banks and that it is ready "to adjust all its instruments, where appropriate, to ensure that inflation is stably close to the target level". All decisions in line with market expectations. 

The expectations of analysts: interlocutory situation

Analysts expected an interlocutory meeting, while the economic prospects do not seem to offer great ideas for change with the dragging of lockdowns and restrictive measures, aimed at trying to contain the infections from Covid, which do not favor acceleration of the recovery. In March, the ECB decided to react to the rise in government bond rates - fearing that it could trigger tightening of bank financing conditions - by intensifying purchases with the Pepp anti-crisis program, but without increasing its endowment or extending its maturity, currently envisaged. at the end of March 2022.