ECB’s Lagarde: We’ve Assumed up to Now That PEPP To Run Until Next March

9 April 2021

By David Barwick – FRANKFURT (Econostream) – European Central Bank President Christine Lagarde on Friday appeared to confirm that she continued to expect the ECB’s pandemic emergency purchase programme (PEPP) to run until next March, even if it could be extended in case of need.

In an interview with CNBC, Lagarde said that the ECB remained ‘very far away’ from price stability, so that it remained too soon to discuss tapering, given regular asset purchases would continue beyond the PEPP.

As for another change in the parameters of the PEPP, ‘[i]f it is necessary to do it again, we will do it again’, she said. ‘If it is necessary to spend more than what has been identified, we will do so. If we can spend less because the situation improves fast, we will do so as well.’

The PEPP will support the economy price stability ‘up until such time when the Governing Council decides that the pandemic crisis is over’, she said. ‘We’ve assumed that it would be March – up until now. If it needs to be extended because the Governing Council determines that the crisis is likely to last longer, we will extend it.’

Lagarde dismissed talk of tapering ‘in US-like terms’, given that the ECB is ‘in a completely different situation’, being ‘very far away’ from its inflation objective.

‘We may well reduce the pandemic emergency programme when the time comes, when we see the crisis coming to an end’, she said. ‘Yes, but that’s the emergency programme. We also have another programme of asset purchases. And as I said, net asset purchases will continue until we start looking at raising policy rates.’

Europe’s economic recovery is ‘delayed, certainly, but it’s not derailed’, she said. The light at the end of the tunnel is visible but ‘not yet within touching distance’, she said. ‘We still have a few innings to go. But certainly in 2021, in the second half of the year there will be recovery that will be moving fast, actually.’

Lagarde expressed confidence that ‘speedier and more efficient’ vaccination programs would bear fruit. ‘[C]ertainly before the end of the summer, 70% of the population vaccinated is something that seems to be very much within reach’, she said.