Economist at UOB Group Lee Sue Ann comments on the latest ECB event (September 9).
Key Takeaways
“Amidst the economic recovery as well as surging inflation in the Eurozone, financial markets have been eagerly awaiting the European Central Bank (ECB)’s latest policy decision for signs of an imminent unwinding of pandemic-era stimulus. On Thursday (9 September), it left policy settings unchanged but opted to tweak its language on the Pandemic Emergency Purchase Programme (PEPP).”
“In terms of macroeconomic projections, the ECB sees inflation being pushed up largely by temporary factors that are expected to fade in the coming years.”
“It is worth noting that ECB President Christine Lagarde displayed a somewhat new open-mindedness to higher inflation. She listed several reasons as to why the current increase in inflation is temporary and emphasized the ECB’s expectation that underlying inflation pressures would rise only gradually.”
“Overall, the latest ECB meeting was in line with our expectations as it “communicated” its plan to slow PEPP purchases “moderately”. This leaves the bulk of the big policy decisions to the December meeting, when the ECB will also be introducing its 2024 forecasts.”
“Further out, we also continue to expect prolonged accommodative monetary policy through a more flexible and larger APP, and that the ECB is unlikely to increase interest rates before 2024.”
