ECB expressed its opinion on the growth of bond yields


ECB President Christine Lagarde

On Thursday, March 11, the Board of Governors of the ECB, following the meeting, kept the base interest rate unchanged at 0.0%.

Key points of the ECB meeting:

  • The purchase of net assets under the Pandemic Emergency Procurement Program (PEPP) totaling € 1,850 billion will last until at least the end of March 2022.
  • Net purchases under the Asset Purchase Program (APP) will continue at a monthly rate of € 20 billion and will end shortly before the ECB starts raising key interest rates.
  • The ECB’s key interest rates will remain at or below current levels until inflation forecast steadily approaches a level close enough to but below 2% within its forecast horizon.

Traditionally, the ECB has said that the regulator is ready, if necessary, to adjust all its instruments to ensure that inflation is moving steadily towards its goal in accordance with its adherence to symmetry.

ECB President: We Will Continue To Track Exchange Rates

During a press conference, the head of the ECB Christine Lagarde noted that the uncertainty of the prospects remains, but in general, in 2021 the economic situation should improve.

The incoming data point to the weakness of the economy in the 1st quarter, which leads to the continued contraction of the GDP. However, the risks to the economy have become more balanced.

The ECB’s procurement policy will be flexible and in line with market conditions, with the potential scale of the PEPP increase not yet discussed.

On the rise in bond yields, Christine Lagarde said that market rates pose a risk to broader financing terms and that higher rates could lead to premature tightening, which is undesirable.

Judging by oil futures, inflation should accelerate in the coming months, the head of the ECB said. Once the impact of the pandemic weakened, upward pressures on inflation would return.

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