Today’s European Central Bank meeting: fixed rates, conference at the start: live

15.22

Inflation and the role of energy

Lagarde reiterated that energy was the root cause of the rise in inflation. Energy prices depend on climatic conditions, geopolitical relationships, and extent of storage. The difference between inflationary forecasts for September and now depends largely on energy.

15.15

PEPP

Flexible PEPP worked well, now we can move on.

15.01

Approval at the European Central Bank

Lagarde said the majority were too big to support the entire day’s package.

14.58

interest rates

For Lagarde, the ECB is unlikely to raise interest rates in 2022.

14.55

suspicion

Lagarde stresses high uncertainty as one of the main topics of today’s meeting. Omicron is one of the points of uncertainty.

14.53

Questions from reporters

Lagarde begins to answer reporters’ questions

14.46

Inflation forecast

Inflation is set to be much higher:

• Inflation rate 2021: 2.6% vs. 2.2% in September forecast
• Inflation rate 2022: 3.2% vs. 1.7% in September forecast
• Inflation rate 2023: 1.8% vs. 1.5% in September forecast
• 2024 inflation: 1.8%

14.45

Energia e . supply chain

Lagarde commented:
“The surge in capacity is a headwind. The bottlenecks will be in place for some time, and are expected to ease in 2022. Growth is expected to pick up sharply in 2022. Inflation will exceed 2% for most of 2022.”

14.43

GDP forecast

These are the expectations for Bill Euro-zone:

• 5.1% in 2021
• 4.2% in 2022
• 2.9% in 2023
• 1.6% in 2024

14.40

Still adapting to politics

Accommodation policy is necessary:
“We need flexibility and discretion. Containment measures can delay recovery”Lagarde commented

14.38

Implementation

The APP scheme for the purchase of conventional assets will be calibrated as follows, after the end of the PEPP in 2022:

• Second quarter: 40 billion euros
• Third quarter 30 billion euros
• Fourth quarter: €20 billion as necessary

The APP will be terminated shortly before the rate hike.

14.35

Inflation and recovery in the eurozone

Lagarde summarized the situation in the eurozone as follows:

• The labor market is improving;
• Eurozone growth momentum waning;
• Activity is expected to increase strongly in 2022;
• There are shortcomings that limit activity and headwinds in the short term;
• Ongoing health crisis
• High inflation largely due to energy;
• lower inflation next year;
• We continue to see below-target medium-term inflation;
• Below-target inflation is expected to stabilize over the projection horizon;
• Progress towards the goal allows for a gradual decrease in EQ

14.33

Lagarde and the situation in the eurozone

The Eurozone economy is recovering, but the Omicron variable has forced restrictions to resume and energy prices are on the rise. Inflation will remain high in the short term, but will decline next year.

14.30

Lagarde conference first

Lagarde begins the press conference after the meeting, which kept interest rates unchanged.

14.20

Press conference, everything is ready

The usual Christine Lagarde press conference will begin in 10 minutes. There is an expectation to understand new details about the economic outlook and the next moves by the European Central Bank.

14.08

Euro / dollar up

After the decisions of the European Central Bank, the EUR/USD pair is trading higher, at the threshold of 1.1332 (+0.42%).

The fact that the European Central Bank announced a reduction in the amount of bond purchases in the third quarter of 2022 and an increase in purchases under the APP to offset the end of the PEPP is considered an aggressive move by analysts.

13.55

monetary policy decisions

The Board of Governors believes that progress in the economic recovery and towards the medium-term inflation target will allow a gradual reduction in the pace of asset purchases over the coming quarters. But monetary adjustment is still needed for inflation to stabilize at the 2% inflation target over the medium term. In view of the current uncertainty, the board of directors must maintain flexibility and discretion in managing monetary policy. With this in mind, the Board of Directors took the following decisions:

Epidemiological Emergency Purchase Program (PEPP)

In the first quarter of 2022, the Board of Directors expects net asset purchases under the Pandemic Emergency Procurement Program (PEPP) to be made at a slower pace than in the previous quarter. It will stop buying net assets under the PEPP at the end of March 2022.

The Board of Directors decided to extend the horizon of reinvestment for the Environmental Protection and Public Health Program. It now intends to reinvest the principal payments of outstanding securities purchased under the PEPP at least until the end of 2024. In any case, the future rotation of the PEPP portfolio will be managed to avoid interfering with the appropriate monetary policy stance.

The pandemic showed that flexibility in planning and conducting asset purchases, under extreme conditions, helps to cope with the changing shift in monetary policy, and has also made efforts to achieve the board’s goal more effective. Within our mandate, under stressful conditions, flexibility will remain an element of monetary policy when threats to monetary policy transmission threaten price stability. In particular, in the event of an epidemic-related market resurgence, PEPP’s reinvestment can be flexibly adjusted at any time, asset class and jurisdiction. This could include buying bonds issued by the Hellenic Republic on top of redemption renewals in order to avoid disrupting purchases in that jurisdiction, which could jeopardize the transmission of monetary policy to the Greek economy while it is still recovering from pandemic setbacks. If necessary, net purchases can also be resumed under the PEPP to counteract the negative shocks associated with the pandemic.

Asset Purchase Program (APP)

In line with the gradual reduction in asset purchases and to ensure that the monetary policy stance remains consistent with inflation stabilizing at its medium-term target, the Board decided on a monthly net purchase pace of €40 billion in the second quarter and €30 billion in the third quarter under a purchase program Asset (APP). From October 2022, the Board will maintain net asset purchases under the Application at a monthly pace of €20 billion for as long as necessary to promote the peaceful impact of its policy rates. The Governing Council expects the net purchases to end shortly before the start of the ECB’s key rate hike.

The Governing Council also intends to continue with the full reinvestment of the principal of outstanding bonds purchased under the APP for an extended period of time after the start date of the ECB rate hike and, in any event, even as necessary to maintain favorable liquidity conditions and a significant degree of monetary accommodation.

European Central Bank key interest rates

The interest rate on the main refinancing facility and the interest rate on the marginal lending facility and the deposit facility will remain unchanged at 0.00%, 0.25% and -0.50%, respectively.

In support of the 2% identical inflation target and in line with its monetary policy strategy, the Governing Council expects the ECB’s key interest rates to remain at current levels or below until inflation reaches 2% before the end of its projected horizon and sustainably. For the rest of the projection horizon, progress in core inflation is believed to be advanced enough to be consistent with inflation stabilizing at 2% over the medium term. This could also mean a transition period in which inflation is moderately above target.

refinancing operations

The Board of Directors will continue to monitor the financing terms of banks and ensure that the maturity of TLTRO III operations does not impede the smooth transition of its monetary policy. The Board of Governors will also regularly assess how targeted lending operations contribute to its monetary policy stance. As announced, the special terms applicable under TLTRO III are expected to expire in June next year. The Board will also consider appropriate calibration of its two-tiered system for rewarding reserves so that the negative interest rate policy does not limit banks’ ability to broker in an environment of too much liquidity.

13.45

modified resolution

The European Central Bank kept interest rates unchanged as expected: deposit rate at -050%; 0% interest rate The interest rate on the marginal lending facility is 0.25%.