The European Central Bank held to its gradual timetable for ending the bond purchases program in Q3 without placing a firm date on when it will increase interest rates.
- Policymakers on the central bank’s governing council face a dilemma of how to rapidly tighten monetary policy in response to record inflation.
- The ECB retained its main policy rate unchanged at minus 0.5 percent and reinforced its statement that the calibration of net purchases for Q3 will be data-dependent and signal the evolving assessment of the outlook.
- Christine Lagarde, ECB president, stated that upside risks to the inflation outlook have intensified, further stating that it could remain higher when price expectations continued to grow and supply chain bottlenecks worsened.
Markets are pricing in an increase in the ECB’s deposit rate back above zero by the close of the year and nearly 1.5 percent by the end of next year.
Euro Stoxx 50 up +0.70%, EURUSD down -0.86%
Source: The European Central Bank