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The ECB keeps rates and stimulus unchanged

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(Kitco News) - The European Central Bank have kept rates and asset purchase unchanged. This was widely expected but questions remained about if the statement would include any details on rising inflation and energy prices. Those expecting any clarity were disappointed and it is over the press conference to find out if any details will be given. The Q&A section could throw up some uncomfortable moments because as of yet the "transitory" inflation stance has been firm across the governing council members.

Ahead of the event, many analysts had been wondering if ECB President Lagarde would mention inflation and the rising gas prices. Another point of contention was the pricing in of rate rises. The markets were looking to see if Lagarde would push back expectations that the ECB would raise rates sooner than previously thought. 

ING noted prior to the event "As regards inflation, it is not only actual inflation data which has come in higher than the ECB had expected. Higher energy prices and a euro exchange rate that is weaker than the latest macro-economic projections will also give the ECB headaches. Updating the ECB’s own technical assumptions from mid-August with the new market reality would mechanically lead to another increase in the inflation projections for 2022 and 2023, by 0.1 to 0.2 percentage points"

Highlights:

ECB Leaves APP Bond Buys At EUR20 Billion Per Month

Net purchases under the APP will continue at a monthly pace of €20 billion. The Governing Council continues to expect monthly net asset purchases under the APP to run for as long as necessary

Net asset purchases under the PEPP with a total envelope of €1,850 billion until at least the end of March 2022PEPP Bond Buys To Continue At "Moderately Lower Pace" Than In 2Q And 3Q

The Governing Council stands ready to adjust all of its instruments, as appropriate, to ensure that inflation stabilizes at its two percent target over the medium term.

The ECB also said it is ready to adjust all tools to stabilize inflation at 2%.

 

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