The Daily Update: Steady as she goes

Steady as she goes was the signal yesterday after the ECB’s statement and subsequent questions and answer session was all about ‘keeping financial conditions stable’. European Central Bank President Christine Lagarde said the ongoing virus posed a ‘serious risk’ to the euro zone economy, however she believed there is light at the end of the tunnel. ‘The start of vaccination campaigns across the euro area is an important milestone in the resolution of the ongoing health crisis. Nonetheless, the pandemic continues to pose serious risks to public health and to the euro area and global economies’ she said at the press conference. Along with the rolling out of the vaccine, Lagarde also mentioned other positives, such as the recent Brexit deal and US elections, as well as the ongoing clouds on the horizon, inflation still low, Q4 GDP fall, and virus variants. Overall, this was seen as balancing out and justifying the ‘unchanged policy stance’ this month.

However, that does not mean that the ECB will be slow to act and will update its policies whenever necessary Lagarde said, especially when it comes to inflation. The policy target has been to achieve an inflation rate close to 2%, however officials have already said they do not expect that to be feasible in the foreseeable future. ‘We continue to stand ready to adjust all of our instruments, as appropriate, to ensure that inflation moves towards our aim in a sustained manner’ Lagarde said.

The central bank stuck with its growth forecasts for this year. Earlier this month Lagarde stated ‘I think our last projections in December are still very clearly plausible.’ In December, the bank estimated a 3.9% GDP rate for 2021, and 2.1% for 2022.