ECB keeps Eurozone stimulus after 31 March 2022

It is too early to state that the economic recovery from the Covid-19 downturn is sustainable, Christine Lagarde says

Photo: EPA Christine Lagarde

The European Central Bank announced it might extend stimulus measures related to the recovery of the Eurozone beyond the initially earmarked deadline of 31 March 2022, Reuters reported. Eurozone is at a turning point and it is too early to state that the economic recovery from the Covid-19 downturn is sustainable, ECB President Christine Lagarde said.

The ECB last week agreed to maintain an elevated pace of bond purchases to keep borrowing costs ultra low and policymakers did not even entertain questions about tapering support, even as growth rebounds faster than earlier predicted. "I am not suggesting that the Pandemic Emergency Purchase Programme (PEPP) is going to stop on 31 March," Lagarde was quoted on Monday as saying. "We have plenty of flexibility, but in terms of economic outlook we are heading in the right direction. "

"It is far too early to debate these issues," she said about winding down the 1.85 trillion euro PEPP, which is scheduled to last at least until March 31 or until the crisis phase of the pandemic is over. Economists expect the ECB to start discussing the end of PEPP at their September meeting and the vast majority of ECB watchers do not expect PEPP to be enlarged and extended again. Instead, the ECB is more likely to shift policy support to an older and more rigid Asset Purchase Programme, which is likely to remain in place indefinitely as inflation is due to undershoot the ECB's target for years to come.

"We are at a turning point where, bearing in mind alternative (virus) variants, we are on that recovery path, heading firmly towards a return to the pre-Covid-19 level," Lagarde added.

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