No new measures, but a very dovish tone

09 March 2021

The ECB will hold its press conference on March 11. The outcome could put the ECB’s credibility at risk.

No new measures, but a very dovish tone

The Governing Council will most likely maintain a very accommodative tone to preserve easy financing conditions and ensure that low rates are passed on to the real economy in order to support the recovery and the convergence of inflation across European countries towards the 2% objective.

We do not expect new measures.  We do not anticipate that theECB will increase the PEPP (Pandemic Emergency Purchase Programme) envelope (EUR1850bn).

Mrs. Christine Lagarde is expected to communicate strongly on the ECB’s new mantra, namely “holistic and multi-faceted” approach to judging financial conditions. Despite the slowdown in PEPP purchases, she could signal action to battle the threat of a sharp rise in yields, with all options open. It is likely that she will also reaffirm the importance of the PEPP’s flexibility. 

Furthermore, the central bank will update their macro-economic projections. We do not expected changes on growth (+3.9% in 2021, +4.2% in 2022). Headline inflation could be revised up significantly in 2021 (+1%) due to recent inflation surprises and the higher price of oil. We do not expect major revisions to the core inflation profile (1.4% in 2023) given the unchanged view on the current degree of slack in the economy.  

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