On Thursday, January 21st, the Board of Governors of the European Central Bank held a meeting on monetary policy, as expected, leaving it unchanged. The main interest rate remained at the level of 0.0%.
The ECB leadership said the spread of the coronavirus and the slow pace of vaccinations worsen future prospects, which casts doubt on the ECB’s forecast of a rapid economic recovery from the second quarter and increases the risk that additional stimulus may be needed sooner rather than later.
During a press conference, ECB President Christine Lagarde noted that due to COVID-19, short-term risks are downward. The pandemic will affect activity in the first quarter of 2021. Inflation remains very low, as it is under significant pressure from the appreciation of the exchange rate, but may accelerate in the coming months.
The head of the ECB added that rates will remain at current or lower levels until inflation approaches the target level and again promised to carry out the PEPP program by the end of March 2022 and revise it if necessary.
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