ECB comment: Flexibility is the word of the day
After a decision-packed December meeting, there were no expectations about today’s ECB meeting, and the ECB delivered exactly what was expected, nothing new. The economic outlook has not changed that much since December, so there was no need for the central bank to adjust its stimulus. After all, the current purchase programme framework has even stronger built-in flexibilities now, when the PEPP is taking a larger role following the end of the temporary 120 bn envelope in the APP. The PEPP, which is designed for the pandemic response, does not pre-commit to any certain levels of purchases, but responds to changes in circumstances. Currently, there has been no increase in purchases, reflecting that the ECB would see a need for more support. This flexibility was repeatedly highlighted by Christine Lagarde during the press conference.
- Today’s ECB meeting was uneventful, which was expected.
- No policy changes, but clear emphasis on flexibility and readiness to adjusts measures if needed.
Favourable financing conditions was, in addition to the flexibility, at the centre of the whole press conference. Lagarde underlined that the ECB does not monitor any specific measure, but follows a holistic approach based on many different measures. When asked about supporting the Italian bond yields and yield curve control more generally, Lagarde simply answered that the ECB is not tied to any specific yield.
The need for structural and fiscal policy was again underlined, and for a good reason. Monetary policy can only do so much and is not a tool for boosting growth potential and change economic structures.
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