Original title: Inflationary pressures are high, and there is still no timetable for the European Central Bank’s withdrawal volume. Source: Xinhuanet
Under the pressure of a sharp rise in inflation expectations, the European Central Bank announced on the 16th that it will end the emergency asset purchase plan implemented during the new crown epidemic as scheduled. Experts believe that the European Central Bank has taken a step towards withdrawing from the ultra-loose monetary policy, but there is still no timetable for ending net asset purchases and raising interest rates.
The European Central Bank decided at the monetary policy meeting that day that emergency debt purchases “will not continue” after the end of March next year. However, the agency has also introduced many “buffer” measures, such as temporarily expanding the conventional asset purchase plan in the second and third quarters of next year, and reinvesting the principal of maturing bonds under the emergency asset purchase plan and continuing at least until the end of 2024.
The statement issued by the European Central Bank on the same day showed the consistent “cautious” attitude in exiting the ultra-loose monetary policy, and strongly emphasized that the monetary policy should remain loose and flexible, and if necessary, emergency bond purchases will be resumed.
In response to the impact of the epidemic, the European Central Bank announced in March last year that it would implement a highly flexible emergency asset purchase plan. Since then, the total bond purchases have been expanded to 1.85 trillion euros. In December of last year, the European Central Bank announced that emergency debt purchases would continue until at least March 2022.
Friedrich Heinemann, an economist at the Center for European Economic Research, said that although the European Central Bank has taken the first step towards ending its monetary policy under the epidemic crisis, the decision is hesitant.
The European Central Bank also sharply raised its medium-term inflation expectations on the 16th. The inflation rate in the euro area next year is expected to be as high as 3.2%, and the forecast in September this year was only 1.7%. In addition, the inflation expectations in 2023 and 2024, as well as the core inflation expectations in the next three years, excluding food and energy prices, are very close to their 2% target.
European Central Bank President Lagarde said in response to reporters’ questions at a press conference that rising energy prices have caused a sharp rise in inflation expectations next year. She emphasized that there is currently no price factor in the euro zone that promotes long-term inflation like the United States. Most of the central bank’s decision-making members firmly believe that the medium-term inflation level has not yet reached the target, so the possibility of raising interest rates next year is very small.
Carsten Brzeski, head of the Macro Research Department of ING International Group, believes that the European Central Bank has entered a very cautious process of reducing quantitative easing, but as long as its judgment that the inflation spike is mainly driven by temporary factors related to the epidemic does not change, the The interest is still far away. The agency also believes that due to the lack of historical experience data similar to the new crown epidemic, the European Central Bank’s economic model has significantly underestimated the current upward risk of inflation.
Jorg Kramer, chief economist at Commerzbank, said that monetary policy in the euro zone will still be very loose in 2022. Even if inflation will temporarily fall at the end of the year, the risk of inflation in the euro zone will still be higher than ever.
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