ECB Keeps Monetary Stimulus On Track Amid Recession Concerns -- Update
By Tom Fairless
FRANKFURT -- The European Central Bank kept its aggressive
monetary stimulus unchanged on Thursday, seeking to support
eurozone governments and businesses through a fresh wave of
Covid-19 infections that likely tipped the bloc back into recession
early this year.
The resurgence of the virus and a sluggish rollout of vaccines
have kept businesses shut across swaths of Europe this year,
driving a divergence with the U.S. economy, which is benefiting
from a hefty dose of government spending and speedier Covid-19
The ECB said in a statement that it would continue to buy
eurozone debt under an emergency EUR1.85 trillion bond-buying
program, equivalent to $2.2 trillion, through at least March 2022.
It said it would buy those bonds at a "significantly higher pace"
during the first months of this year, repeating a pledge made last
Investors will now turn to ECB President Christine Lagarde's
news conference, starting at 8:30 a.m. ET, for insights into the
bank's view on the economic recovery and next policy steps. In
particular, investors are watching for signs that the ECB might
slow its bond purchases as the economic recovery gathers pace.
Sovereign-bond yields have risen across Europe this year, partly
reflecting brighter economic prospects, but also a spillover from
the robust recovery in the U.S. That puts pressure on European
governments, which are increasing spending to support workers and
firms hurt by virus-related shutdowns.
The rise in bond yields has slowed in recent weeks, however.
Vaccination rates across Europe have picked up as supply
bottlenecks eased, approaching U.S. speeds in places, and recent
economic surveys suggest business confidence is trending
Governments in Germany and Italy have signaled they are willing
to run large deficits this year as they spend more money to support
their economies, noted Andreas Billmeier, European economist at
Western Asset Management.
"This gives you medium term confidence that we're not going to
repeat the error of 10 years ago," when European governments sought
to reduce spending too quickly, hurting the economic recovery, Mr.
The eurozone economy is likely to grow at an annualized rate of
6% in the second quarter of 2021, after contracting 1% in the first
three months of the year, according to JPMorgan. The U.S. economy
will likely grow at an annualized rate of almost 10% in the second
quarter after around 5% in the first quarter, JPMorgan said.
"The pace of vaccinations [in Europe] does appear to be taking a
big step up this month and our modeling suggests the current set of
restrictions in France and Italy have reduced mobility enough to
bring the flow of new cases back under control," JPMorgan analysts
wrote in a note. "But this is not the case for Germany and
Meanwhile, bank lending data published by the ECB this week
suggested tightening credit standards for businesses and lower
demand for borrowing, a potential brake on the recovery. Europe is
also preparing for major elections in France and Germany over the
next 12 months, which could upend government spending plans.
Write to Tom Fairless at email@example.com
(END) Dow Jones Newswires
April 22, 2021 08:15 ET (12:15 GMT)
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