Frankfurt (AFP)

The economic recovery is within reach, inflation is picking up again in the euro zone, interest rates are rising slowly: will the European Central Bank (ECB) consider reducing its intervention?

The issue will be the backdrop on Thursday of its monetary policy meeting.

Even if the puzzle of a return to growth falls into place with the progress of immunization and the lifting of health restrictions, the 25 members of the Board of Governors should remain loyal to the anti-interest rate crisis potion historically. low and massive debt purchases that they reinforced at the start of the pandemic, observers said.

Starting now the discussion on the normalization of monetary policy would be "delicate", believes Frederik Ducrozet, strategist at Pictet Wealth Management.

Such an initiative would take "the risk of sending too restrictive signals" which could worry the markets, he points out.

Faced with the impact of Covid-19, the ECB launched in 2020 a pandemic emergency purchase program (PEPP) of 1.850 billion euros intended to buy debts on the markets.

More than half of the sum has already been used, and the ECB has planned to use it at least until March 2022. The debate is swelling, however, on the rate of spending of this envelope.

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In March, seeing that the interest rates at which European states finance their loans began to rise, the ECB accelerated its intervention, reaching 20 billion in debt repurchases per week.

- Messages -

With the expected restart of the economy, "hawks", these supporters of monetary orthodoxy, are once again making themselves heard to demand an end to the ECB's emergency support programs.

In April, the Governor of the Bank of the Netherlands, Klaas Knot, called for the ECB's intervention to be reduced from "the third quarter".

Some German officials are alarmed on their side by the rebound in prices: the inflation rate in the euro zone continued to rise in May and reached 2% over one year, the upper limit of the target set by the ECB.

In Germany, the rise in prices has even reached 2.5%, its highest pace in a decade, and the German central bank does not rule out that it may reach 4% at the end of the year.

But faced with fears that too high inflation stifles the recovery, European monetary officials are taking turns to hammer out the same message: this increase is temporary and the ECB does not intend to tighten its monetary policy.

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The increase is based on transient factors - energy prices, shortage of components in the industry, ... - and the pressure should fall in 2022, the monetary institute had already warned at its April meeting. .

"Uncertainty over the timing and intensity of the recovery requires that financing conditions remain accommodative for a long time," said Ignazio Visco, governor of the Bank of Italy, at the end of May.

Any discussion on the gradual abolition of the PEPP is "still clearly premature," Fabio Panetta, member of the ECB's executive board, said earlier.

Until the president of the institution, Christine Lagarde, last week: the ECB is committed to maintaining "favorable financing conditions" until the sustainable recovery of the economy, she recalled.

- Wait for summer -

The guardians of the euro will want to know "how the reopening of economies is going this summer, if only because the tourist season is crucial for many member states", explains Gilles Moec, chief economist at Axa.

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The ECB can "afford to keep its foot on the floor for another three months" by continuing to buy back massive amounts of public and private debt on the market, said Holger Schmieding, economist at Berenberg.

Central bankers will also decide on the basis of new economic projections for 2023.

On the growth side, little change is expected compared to March, when the institute bet on a rebound in the second half of 2021 to achieve a score of 4% over the year and 4.1% next year, in harvesting the fruits of the European "Next Generation" recovery plan.

Inflation forecast at 1.5% this year is likely to be revised upwards, according to observers, before a relapse expected in 2022.

© 2021 AFP