Friday, 04 June, 2021
(BN) ECB Seen Pushing Ahead With Faster Bond Buying Until Septem
——————————————————————————-
This message may contain confidential or privileged information. If you are not
the intended recipient, please advise us immediately and delete this message.
The unauthorised use, disclosure, distribution and/or copying of this e-mail or
any information it contains is prohibited.
This information is not, and should not be construed as, a recommendation,
solicitation or offer to buy or sell any securities or related financial
products. This information does not constitute investment advice, does not
constitute a personal recommendation and has been prepared without regard to
the individual financial circumstances, needs or objectives of persons who
receive it.
2021-06-04 04:00:00.7 GMT
By Alexander Weber and Harumi Ichikura
(Bloomberg) — The European Central Bank will extend its
phase of faster bond-buying through the summer to ensure the
economic rebound after coronavirus lockdowns morphs into a
sustained recovery, according to a Bloomberg survey of
economists.
The majority expects the ECB to keep purchasing about 20
billion euros ($24.4 billion) worth of debt a week until
September before slowing down. Most expect the 1.85 trillion-
euro pandemic program to finish in March 2022, as currently
planned.
The central bank accelerated purchases in March to keep
financing conditions for companies, households and governments
across the euro area favorable. Ahead of their June 10 meeting,
policy makers have pushed back against the idea that they’ll
pull back on buying as governments ease curbs on public life.
With growing price pressures around the globe, investors
are closely watching for signs that central banks are ready to
moderate the flood of liquidity they unleashed during the
pandemic. Inflation in the euro area accelerated to 2% last
month, technically above the ECB’s goal, though most economists
and officials have said it’s a temporary phenomenon that will
fade before long.
What Bloomberg Economics Says…
“This seems to be no time for the hawks to bicker about
more bond buying. Bloomberg Economics expects policy makers to
opt for another three months of ‘significantly higher’ purchases
through the Pandemic Emergency Purchase Program.”
–David Powell, Maeva Cousin. Read the full report here.
President Christine Lagarde “will stress that the negative
effects of the pandemic on the economy and hence inflation are
still significant,” said Joerg Angele, an economist at Bantleon
Bank. “However, regarding communication, this ECB meeting will
be one of the most tricky ones in the past quarters.”
One complicating factor is that bond purchases are
typically lower in the summer when market liquidity thins – a
trend that could send the wrong signal to investors. Another is
that the economic outlook is looking brighter, making it
difficult to avoid a debate about a policy shift for much
longer.
“The ECB can use the fact that we are heading into the
quieter summer months to justify a slightly slower pace,” said
Bas van Geffen, an economist at Rabobank. “That said, it may
still be a bit of a hard sell to the market, requiring e.g.
dovish rhetoric on medium-term inflation, even though the short-
term economic outlook is improving.”
Europe’s vaccination campaign has picked up significantly
after early stumbles, allowing governments to gradually ease
restrictions on restaurants, travel and other activities. Recent
economic indicators have signaled that the economy is starting
to turn the page on the pandemic.
Three-quarters of economists surveyed expect the new
forecasts presented at the meeting to show faster growth this
year. The vast majority also said inflation projections for 2021
and 2022 will be revised upward.
“Fortunately for the ECB, the meeting comes early enough to
still point to doubts and risks to the economic outlook, hence
justifying a stance of ‘it’s too early to withdraw any kind of
stimulus,’” said Carsten Brzeski, an economist at ING. “This
stance will be very hard to maintain after the summer.”
Nearly half of the respondents expects the ECB won’t use up
the full amount of the pandemic program. At the same time, one
third expect an older purchase program that’s currently running
at 20 billion euros a month to be expanded to provide continued
support.
Another focus of the meeting is the ECB’s review of its
strategy. Economists in the survey expect the results to be
unveiled in September. Nearly eight out of ten said the central
bank’s revised approach will include a “symmetric” inflation
target, meaning policy makers will react equally to too-low and
too-high results.
A majority also said policy makers will settle on a 2%
inflation target — as opposed to the current “below, but close
to, 2%” — and a closer focus on climate change.
*T
Read more:
Europe’s Pricier Summer Set to Test Central Bankers’ ResolveECB
Study on Inflation Targeting Finds Ranges Beat Hard GoalsEuro-
Area Factory Bottlenecks Curb Output and Fuel Inflation
*T
To contact the reporters on this story:
Alexander Weber in Frankfurt at aweber45@bloomberg.net;
Harumi Ichikura in London at hichikura@bloomberg.net
To contact the editors responsible for this story:
Paul Gordon at pgordon6@bloomberg.net
Jana Randow
https://blinks.bloomberg.com/news/stories/QU2IVRT0AFB7