Thursday 9th September 2021 - 13:15 (BST)
The European Central Bank (ECB) struck a slightly more hawkish tone following the conclusion of its latest 2 day meeting in Frankfurt, Germany. As expected, policymakers decided to leave the EU deposit facility rate unchanged at -0.50% and its marginal lending facility at 0%.
The central bank also announced it would start conducting a moderately slower purchasing pace of its pandemic emergency purchase programme (PEPP) following numerous ECB members publicly calling for a reduction in recent weeks.
Policymakers did not provide details about the tapering schedule and speed, saying the bank will purchase flexibly according to market conditions, but did confirm it would start dialling things back during Q4 2021.
It also reiterated the total target will be kept at €1.85 trillion until March 2022, or later if necessary – signalling the ECB is not considering reducing stimulus just yet.
The recent upgrade of EU Q2 GDP output along with an improvement in employment across the region will have helped the central bank ahead of its latest move. It also maintained the 3% inflation rise (the highest since November 2011) is transitory and likely to fall back once the post-pandemic recovery is in its maturity phase.
The euro strengthened slightly following the news but remained below key levels of resistance against both the pound and US dollar.
The decision comes two days after the Reserve Bank Australia decided to slow the pace of its bond purchases and extend their buying period until February. Conversely, the Bank of Canada decided to leave its interest rates and quantitative easing policies unchanged.
