Monetary policy The European Central Bank suggests that the monetary stimulus will continue for a long time to come

The central bank has made it clear that key interest rates will not be changed until the securities purchase programs have been discontinued.

European the central bank (ECB) hinted on Thursday that its monetary stimulus may continue longer than previously estimated. The reason is that the central bank moved two weeks ago price stability objective.

Officially, the ECB maintains its old estimate that the emergency funding initiated due to the coronavirus pandemic will continue at least until the end of March next year.

The central bank has also made it clear that key interest rates will not be changed until the securities purchase programs are discontinued.

Coronavirus pandemic In addition to the emergency funding launched as a result, the ECB purchases € 20 billion worth of securities on the market each month in a separate purchase program, most of which are euro area government bonds.

New the price stability target is clearer and symmetric: inflation may temporarily be faster or slower than the 2% target, as long as it is 2% over the medium term.

According to the old target, the inflation rate should have been slightly below 2% over the medium term. Studies have shown that the target of price stability of just below 2% actually meant aiming for inflation at 1.6-1.8%.

In June According to Eurostat, the inflation rate in the euro area was 1.9%. However, central banks do not make their monetary policy decisions on the basis of one or a few months of inflation data.

In June, the ECB forecast that inflation in the euro area would accelerate to 1.9% this year, but slow to 1.5% next year.

According to the forecast, inflation may accelerate temporarily to 2.6% in October – December this year as the euro area economy recovers from last year’s recession.

The ECB estimates that the euro area economy will grow by 4.6% this year and 4.7% next year.

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