The European Central Bank (ECB) increases its corona emergency purchase program for bonds by 600 billion euros from the previous 750 billion to 1.35 billion euros. This was decided by the Governing Council yesterday in its meeting in Frankfurt. The minimum term of the purchase program will also be extended by half a year until the end of June 2021.
According to the ECB, the corona recession will be more severe than previously thought. The gross domestic product (GDP) in the eurozone is likely to collapse by 8.7 percent this year, as ECB President Christine Lagarde announced after the interest rate meeting. In March, the economists at the central bank still thought growth of 0.8 percent was possible.
“The latest indicators point to some bottoming of the May downturn as parts of the economy are gradually reopening,” said Lagarde. Accordingly, the economy is expected to pick up again from the second half of the year. “The overall pace and extent of the recovery remain highly uncertain,” said Lagarde.
The severe crisis is likely to dampen inflation. For this year only an average inflation rate of 0.3 percent is expected. So far, the ECB had assumed 1.1 percent.
The ECB sees stable prices – its most important goal – guaranteed in the medium term at values of just under two percent. This mark is likely to fall far short of 0.8 percent in 2021 and 1.3 percent in 2022.
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