Original title: the European Central Bank maintains stability as scheduled in July, and President Christine Lagarde is optimistic about the prospects for economic recovery.
The ECB's governing council kept the monetary status quo unchanged at its meeting on Thursday (July 22), in line with previous expectations. After the announcement of the resolution, the euro fluctuated against the dollar at nearly 30 points. President Christine Lagarde said at a subsequent press conference that the economic recovery is on the right track, the need to maintain favorable financing conditions, the euro against the dollar.
It rose from 17:00 to 1.1798 and is now trading on the 1.1793 front line. the following are the main highlights of the interest rate decision.
The main points of the ECB's July interest rate resolution are as follows:
1 interest rate decision: keep the main refinancing rate at 0%, the marginal lending rate at 0.25%, and the deposit mechanism interest rate at-0.5%, in line with market expectations.
2 Monetary policy: flexible purchases according to market conditions to prevent tightening of financing conditions, which is inconsistent with the downward impact of combating pandemics on the expected inflation path; if favorable financing conditions can be maintained, the flow of asset purchases will not exceed the net purchasing range of purchasing power parity, and the Emergency Anti-epidemic debt purchase Program (PEEP) will not need to be fully used. It will continue to provide sufficient liquidity through refinancing operations, and will be prepared to adjust all instruments appropriately to ensure that inflation is stable at 2% in the medium term; after confirming its June assessment of financing conditions and inflation prospects, the ECB continues to predict that PEEP purchases will be much faster this quarter than before.
3 inflation: changing the interest rate guidance may also mean that inflation is moderately above target for a short period of time, setting the inflation target from "below but close to 2 per cent" to "2 per cent", which may mean that inflation is moderately above target in the short term; the ECB's new guidance suggests that inflation must be seen to reach 2 per cent before the end of its forecast period and continue for the rest of the forecast period.
The main highlights of the press conference of ECB President Christine Lagarde:
Monetary policy: the revised guidelines emphasize the commitment to maintain a loose position
2 economy: the economic recovery is on the right track, the economy rebounded in the second quarter, the economy is expected to grow strongly in the third quarter, the manufacturing industry is expected to be strong, and economic activity is expected to return to pre-crisis levels in the first quarter of next year.
3 inflation: the medium-term inflation outlook is much lower than the ECB's target, inflation is driven by higher energy prices, base effect; although lower than the target, potential inflation will gradually rise in the medium term
4 risk: the balance of risk is generally balanced, the uncertainty of Delta strain is increasing, and Delta strain may inhibit the recovery of service industry.
Institutional point of view
Senior Editor Eric Coleman comments on ECB interest rate Resolution: one of the key issues of the new ECB policy framework is its relationship with
The difference between the policy framework. The ECB's statement links future interest rates to expected inflation, in sharp contrast to the Fed's AIT framework, which emphasizes the results. Now, from a practical point of view, the ECB is unlikely to forecast that inflation will remain at around 2 per cent unless it is already at 2 per cent. But in a sense, policy is still driven by looking forward, not backward. I think whether this is hawkish or dovish relative to the Fed depends on the environment. After all, regardless of inflation, with a little creative prediction, the ECB can justify any policy decision it wants to take based on its expectations of whether CPI will reach 2 per cent in the next few years.
Institutional comments on ECB interest rate decisions: it is expected that the subsequent interest rate decisions will remain unchanged in PEPP and APP.
Investors expect ECB President Christine Lagarde to release inflation guidelines at a news conference and explain its exact impact on interest rates and asset purchases. But interest rate hikes have been delayed since the strategy update, and the bank's deposit rate is not expected to rise until 2024, so Ms Lagarde is likely to seek to keep those expectations unchanged rather than pushing rates higher. Investors will also look for clues about the future pace of asset purchases after the ECB leaves the main parameters of its emergency epidemic-resistant bond purchase programme (PEPP) and asset purchase programme unchanged. PEPP will last at least until March next year, and trading volume in the third quarter will be much higher than at the beginning of the year. Meanwhile, monthly asset purchases are expected to remain at $20 billion before the first rate hike.