ECB’s Müller: Since Yields Stopped Rising, No Need to Take Any Action

23 April 2021

By David Barwick – FRANKFURT (Econostream) – European Central Bank Governing Council member Madis Müller said Friday that since market interest rates hadn’t risen further, the ECB had no reason to do anything at last week’s monetary policy meeting.

In a blog post on the website of the Estonian central bank, which he heads, Müller said that the Council’s meeting the previous day had reconfirmed the decisions of March, and that going forward, monetary policy had to ‘keep the recovery in line.’

Noting the rise in market yields earlier in the year and the ECB’s decision to accelerate asset purchases to counter this, Müller wrote that ‘[s]ince the rise in interest rates also stopped, there was no need to change the current plans and previous policy decisions at this week's meeting.’

Incoming data ‘broadly’ confirmed the assumption in March that the euro area’s economic recovery would begin ‘this spring or early summer’, he wrote. The start of 2021 has been ‘difficult’ because of the pandemic and bumpy vaccination progress, but survey data show the recovery already underway, especially in manufacturing, he said.

‘It is also clear from the turnover figures that companies have been able to adapt to working under restrictions’, Müller wrote. ‘As a result, the disincentive effect of the restrictions on economic activity during the second wave of the virus has remained smaller than last spring.’

The pace of recovery depended mainly on the evolution of the pandemic and the response to it, which remain uncertain, he said. However, he added, it seems reasonable to assume that enough people will have been vaccinated in the second half of the year for restrictions to be lifted.

Müller urged that the Next Generation EU recovery fund be launched ‘without delay’.

Although survey data suggest that many people will not spend savings accumulated during the crisis, he said that in fact, ‘past experience suggests that savings are more likely to reach consumption fairly quickly.’