ECB Remained On The Sidelines In January – UOB

Economist at UOB Group Lee Sue Ann assessed the latest ECB event (Thursday).

Currency of European Union on marble surface

Image source: Pexels

Key Quotes

“As expected, the European Central Bank (ECB), at its first meeting of the year, made no changes to interest rates or its asset-buying program after moving in December to bolster its efforts to support the Eurozone economy.”

“The ECB left its deposit rate at -0.5% and its main refinancing rate at 0%. In the accompanying press release, the central bank also affirmed it would maintain the "envelope" for its pandemic emergency purchase program at EUR1.85tn and would continue monthly purchases under the program until at least the end of March 2022. It added that if "favorable financing conditions can be maintained with asset purchase flows that do not exhaust the envelope over the net purchase horizon of the PEPP, the envelope need not be used in full. Equally, the envelope can be recalibrated if required to maintain favorable financing conditions to help counter the negative pandemic shock to the path of inflation." The ECB will also continue its asset purchase program at a pace of EUR20bn a month.”

“In all, after unveiling the policy package in December, it was not surprising to see the ECB keeping to the sidelines. Yet, it has kept all options open. For now, the ECB is likely to stick to this line for the time being, though all eyes will remain on Lagarde’s communication going forward.”

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