The ECB will re-evaluate its asset purchases in June after an in-depth review
Lydie Boucher and Eric Chalmet
The European Central Bank (ECB) will re-evaluate its asset purchases in June based on an in-depth review of financial conditions and the inflation outlook, according to the minutes of its 21-22 April monetary policy meeting.
During their meeting, governors stressed the flexibility of the ECB’s Pandemic Emergency Purchasing Programme (PEPP), noting that the pace of purchasing could be “adjusted to market conditions”.
“Members recalled that the monetary policy meeting in June would provide the next opportunity to conduct a thorough assessment of financing conditions and the inflation outlook”, said the minutes, which were released Friday. The ECB will then have updated economic projections from its staff.
The budget of the PEPP, which was launched in March 2020 to protect the euro zone from the pandemic’s economic repercussions, had been kept at 1,850 billion euros after the ECB’s latest meeting. PEPP will continue at least until March 2022, as stated previously, the central bank said then. Depending on trends in financing conditions, the envelope may not be used in whole or could be recalibrated, the ECB said.
If favourable financial conditions can be maintained with asset flows that do not exhaust the envelope “on the net purchase horizon of the PEPP”, then “the envelop need not be used in full”, the minutes said.
In reaction to higher bond yields on the year to date and avoid a toughening in euro zone financing conditions, the ECB had announced in March an acceleration in the pace of its purchases conducted under PEPP in the second quarter.
“A new comprehensive joint assessment should be conducted at the next monetary policy meeting in June”, the minutes said. “It is important to note that the calibration of assets under the PEPP to counter the negative effects of the pandemic on medium-term inflation outlook is just one way to achieve the objective of stabilising inflation in the medium term around levels below but close to 2%”, the minutes said.