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With the press conference of Christine Lagarde the curtain fell meeting of January 21, premiere of 2021, of the ECB.
A meeting without great surprises, which met the expectations of analysts and left the stimulus plan unchanged already started and expanded by the Frankfurt institute in December 2020.
Therefore, the European Central Bank decided keep interest rates unchanged and confirm its monetary support for the coronavirus-hit economy, betting that the stimulus package will deliver 1,850 billion euros you can act effectively in the coming months.
The general feeling, in fact, was that the Frankfurt institute this time hired a wait and see attitude, after the measure in December, when the bond buying program was shamelessly boosted, with more 500 billion euros and an extension of its duration until March 2022.
The institute led by Christine Lagarde He went back to discussing the next recovery forecasts for the euro area. Estimates are on the downside, with a contraction expected in the fourth quarter of 2020 due to the uncertainty linked to the pandemic that has become aggressive in many countries. Therefore, the double recession remains a likely scenario.
The ECB confirmed its readiness, if necessary, to adapt its interventions and instruments. The goal remains observation of inflation and the approach to the objective of 2%. To this end, Lagarde recalled that the modification of the ECB’s instruments can be considered. Indeed, the PEPP, with its flexibility, lends itself to any changes to preserve favorable financing conditions for the euro area, while the pandemic continues to threaten stability.
The ECB meeting in January in fact, he postponed any important decisions on possible new interventions until the March meeting.
ECB meeting: January decisions and euro zone estimates
A’Eurozone divided between positive developments and less encouraging and worsening signs of what Lagarde described at the end ofECB meeting in January 2021.
Yes, in fact, on the one hand the vaccination campaign that has now begun, albeit with slowdowns, the Brexit trade agreement, the US elections safely shelved and the relaunch of manufacturing The pandemic continues to threaten.
The downside risks for the growth of the euro zone are many and linked to the variants of the virus, to the renewed ones. emergency shutdown and to resurgence of infections. In this context, Lagarde explained the decisions of the ECB, which did not modify its expansionary monetary policy.
Here are the key themes for the meeting on January 21, 2021:
- the euro area contracted in the fourth quarter and the slowdown in GDP will also extend to the first quarter of 2021;
- the pandemic and blockades are contracting activity, although to a lesser extent than the first wave;
- the PEPP It is designed to preserve favorable conditions and is flexible, this is also the key element in the field of inflation. It can be reformed for the pre-pandemic inflation target. The endowment can increase or decrease;
- under favorable conditions, consider not using the full PEPP envelope;
- the estimate is that key rates will remain at or below current levels until inflation outlook they will not converge robustly to a level close enough, but below 2%;
- In the medium term, upward pressures on inflation are expected once the pandemic subsides;
- governments’ fiscal policies remain important. The next generation EU is crucial if it goes live soon
Today’s ECB meeting, January 21: real-time updates
Below are live updates from today’s ECB meeting:
15:33 – The press conference ends
Christine Lagarde closes the press conference by greeting and thanking the public
15:30 – GDP forecast
The fourth quarter GDP slowdown will extend into the next quarter
15:25 – PEPP and other instruments
Lagarde insists on a key point: the PEPP budget is flexible, currently at 1.85 billion euros, but it can increase or decrease. Not in a simplistic way, but observing favorable conditions or not.
However, all tools remain on the table and can be used after careful consideration.
15:08 – Digital Euro
Lagarde clarifies about the virtual currency: “I want to minimize any expectation that a digital euro is about to arrive, it will take several years”
15:03 – ECB target
Lagarde insists: “Our aim is to preserve favorable financing conditions in the euro area … it is not guided by any indicator”
15:00 – Focus on PEPP and inflation
Lagarde: “PEPP designed to preserve favorable and flexible conditions, this is the key element also in the field of inflation. It can be reformed to target pre-pandemic inflation “
2:55 pm – Exchange rate
Lagarde points out that one of the reasons for the weak inflation is the appreciation of the euro exchange rate
14:52 – Positive and negative elements for the Eurozone
Lagarde lists some positive aspects of the moment: Brexit, less uncertainty regarding the United States, manufacturing power and vaccines.
Negative aspects: pandemic, blockages and new variants of the virus
2:50 pm – Questions from journalists
Questions from journalists to Christine Lagarde are ongoing
2:46 p.m. – Role of governments
Governments must do more, especially in terms of fiscal policy
2.44 pm – Inflation forecast
Lagarde sees upward pressure on inflation in the medium term once the pandemic subsides. Market inflation expectations have risen slightly. The underlying pressures on prices are expected to remain contained due to weak demand.
Interest rates will remain at 0 until inflation solidly converges “to our target of almost, but below 2%.”
14:42 – Consumption
Lagarde points out: Consumers remain cautious in the face of the impact of the pandemic on employment and investment
14:41 – PEPP confirmed
Lagarde confirms the PEPP plan for the scope of December and until the end of March 2022 and adds “If favorable financing conditions can be maintained, it will not be necessary to use the entire budget (1.85 billion euros).”
2.40 p.m. – The panorama of the situation in the euro zone
Lagarde offers a summary of the situation:
- The euro zone contracted in the fourth quarter
- ECB ready to adjust all instruments as needed
- ECB monitors FX for impact on inflation
- Uncertainty remains high
- Inflation is still very low
- Downside risks to the short-term outlook
- New infections and crashes are disrupting business
14:35 – The pandemic remains a risk
Lagarde begins by talking about the resurgence of viruses and blockades and their damage to economic activity, mainly in the service sector. The damage is less than in the first wave, but the pandemic continues to pose serious risks to public health, the euro area and world economies.
2.30 pm – First conference 2021
Lagarde points out that we are still affected by the coronavirus, so I send a greeting to all the people affected by the virus
2:15 pm – The press conference is about to begin.
In 15 minutes Christine Lagarde will speak at a press conference to clarify the decisions of today’s meeting.
14:06 – The key points of the ECB statement
- The ECB expects key rates to remain at current levels or lower until inflation prospects solidly converge to close enough, but below 2%.
- Purchases under the PEPP are maintained with a total budget of 1,850 million euros
- Purchases under the PEPP will be made to preserve favorable financing conditions during the pandemic period, with the possibility of recalibrating the scope to counteract the inflationary shock.
- The ECB is ready to adjust all its tools, as appropriate, to ensure that inflation moves towards its target on a sustained basis
2pm – Full ECB press release
The Governing Council has decided to reconfirm the very accommodative stance of its monetary policy.
First, the interest rates on the main refinancing operations, the marginal line of credit and the deposits with the central bank will remain unchanged at 0.00%, 0.25% and -0.50% , respectively. The Governing Council hopes that I The ECB’s key interest rates remain at or below current levels until inflation outlooks firmly converge to close enough but below 2%. in its projection horizon and this convergence will not be consistently reflected in the dynamics of core inflation.
Secondly, The Governing Council will continue purchases within the framework of the pandemic emergency purchase program (PEPP) with a total budget of 1.85 billion euros. It will make net purchases of assets under the PEPP at least until the end of March 2022 and, in any case, until the critical phase linked to the coronavirus concludes. Purchases under the PEPP will be made to maintain favorable financing conditions during the pandemic period. If favorable financing conditions can be maintained through asset purchase flows that do not exhaust the envelope within the PEPP’s net purchase horizon, full use of the envelope will not be required. Similarly, the endowment can be recalibrated, if necessary, to preserve favorable financing conditions that help counter the negative impact of the pandemic on inflation.
The Governing Council will continue to reinvest the amortized principal in the bonds maturing under the PEPP at least until the end of 2023. In any case, the future reduction of the PEPP portfolio will be managed in such a way as to avoid interference with the proper guidance of monetary policy. .
Third, net purchases under the Asset Purchase Program (APP) will continue at a monthly rate of € 20 billion. The Governing Council continues to expect that the monthly purchases of net assets under the PPP will continue as long as necessary to reinforce the accommodative impact of its official interest rates and will end shortly before the official ECB interest rates start. to go up.
The Governing Council also intends to continue to reinvest, in full, the principal repaid from the securities maturing under the APP for an extended period of time after the date that key ECB interest rates begin to rise. and, in any case, until it will be necessary to maintain favorable liquidity conditions and a high degree of monetary accommodation.
Finally, the Governing Council will continue to provide abundant liquidity through its refinancing operations. In particular, the third series of longer-term focused refinancing operations (TLTRO-III) continues to be an attractive source of financing for banks, supporting bank loans to businesses and households.
The Governing Council remains ready to adjust all its instruments, where appropriate, to ensure that inflation continues to stably approach the target level, in line with its commitment to symmetry.
13:45 – Decision on interest rates
The ECB’s decision on interest rates:
- Interest rate: 0.00%
- Deposit rate: -0.50%
- Marginal financing rate: 0.25%
12:15 pm – Waiting for Lagarde’s lecture
Click here to watch the live stream of Christine Lagarde’s press conference starting at 2.30pm. This page, on the other hand, will present all the updates in real time and in Italian.
