Faced with the macroeconomic uncertainties linked to the Covid-19 pandemic, the European Central Bank (ECB) maintained, on Thursday 21 January, the monetary course set in December 2020.
We have decided to “reconfirm our very accommodative monetary policy stance”, confirmed the President of the Monetary Institute, Christine Lagarde, at the end of the Governing Council.
She indicated that the economic projections - growth of 3.9% of GDP in 2021 in the euro area after a recession of 7.3% of GDP - unveiled in December, and which had pushed the ECB to further strengthen its operations aimed at facilitating financing conditions (see EUROPE 12620/8), were “still valid”.
The former IMF boss reported that downside risks to the economy are still predominant. Despite positive signals, such as the start of vaccination campaigns, the EU/UK agreement and the European Recovery Plan, she referred to the emergence of variants of the coronavirus responsible for Covid-19 that could force states to tighten health measures, with a negative impact on the economy.
“In this environment ample monetary stimulus remains essential to preserve favourable financing conditions over the pandemic period for all sectors of the economy”, Mrs Lagarde said. And, she added, the ECB stands “ready to adjust all its instruments” to respond appropriately to the economic situation.
In mid-December, the Frankfurt monetary institute had notably reinforced for a second time the PEPP operation of massive repurchase of mainly public securities by increasing its allocation to €1,850 billion and extending it until the end of March 2022 at the earliest. Mrs Lagarde recalled that the ECB could review the firepower of this very flexible instrument by not investing the entire available envelope or by increasing it if necessary.
On the budgetary front, the ECB President considered that national budgetary policies should continue to be expansive to deal with the pandemic, while remaining “as targeted and temporary as possible”. According to her, the Next Generation EU European Recovery Plan, which should be operational “without delay”, is an opportunity for Member States to adopt reforms to tackle structural weaknesses and accelerate the ecological and digital transitions.
On Tuesday, the European Commission asked the EU-27 to include more reforms in their draft recovery plans (see EUROPE 12639/2).
Yield curve. On the debate related to long-term interest rates, Mrs Lagarde denied any recourse by the monetary institute to a strategy aimed at controlling long-term rates on the sovereign debts of euro area countries. We don't look at certain rates in a specific way, “our approach is holistic”, she argued.
Digital Euro. With regard to the possible creation of a digital euro, which could be decided “in April”, Mrs Lagarde recalled that this project, if launched, would last “several years” and would have to answer several legal and technical questions so that it serves the interests of all citizens.
The specific public consultation, which the ECB initiated, received more than 8,200 responses from stakeholders (see EUROPE 12581/21). According to an initial analysis of the responses to this consultation, the concerns expressed relate to privacy and security. (Original version in French by Mathieu Bion)