The period when the European Central Bank keeps interest rates at their lowest level in its relatively short history will be extended. This was stated by ECB President Christine Lagarde after Thursday’s monetary policy meeting.
Interest rates in the euro area will remain at current levels until inflation can be sufficiently increased. Although it reached the target 2-percent level in April, the June numbers again indicated a downward trend. The ECB will raise rates when it sees a clear achievement of its inflation target over the monetary policy horizon, ie in the outlook for 2023.
Another reason for leaving the current monetary policy stance of the ECB unchanged is the concern about the rapid spread of the SARS-CoV-2 delta virus variant.According to the ECB, its onset increases the risk of a slowdown in the euro area’s economic recovery.
The European Central Bank will also extend its asset purchase program until at least March next year. Even in this case, the aim is to support the economic recovery of the euro area following the severe intervention of the coronavirus pandemic. According to analysts, however, the ECB will sooner or later have to decide when to end the so-called quantitative easing.
