The ECB takes its foot off the accelerator. The money press will run slightly slower than in the previous two quarters.
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Bond purchases under the PEPP pandemic relief program will now proceed at a ‘moderately slower’ pace. The European Central Bank (ECB) announced this today. The eurozone economy can manage with slightly less monetary stimulus. Due to the rising inflation figures, the ECB can slow down a bit.
It is a small adjustment in monetary policy. The broad outlines remain unchanged. The size of the PEPP program – EUR 1,850 billion – will not change. Only the monthly pace at which the money is spent will slow down a bit. It is not certain that the full amount must be used. In addition, the normal purchase program of 20 billion euros per month will continue as usual.
The ECB also confirmed that inflation is not the main concern at the moment. The new symmetrical approach means that the figure can safely rise above 2 percent without immediate intervention by the ECB.
The markets had been looking forward to the ECB meeting with some trepidation. The question was whether the bank, following the lead of the Fed, would give the impression that the phasing out of the stimulus program is being prepared. Today’s announcement can be interpreted as such, but the ECB also emphasizes that the pace of purchases can be increased again if desired.
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