ECB’s Lagarde: Way Too Early and Unnecessary to Ask Ourselves About Tapering

21 May 2021

By David Barwick – FRANKFURT (Econostream) – European Central Bank President Christine Lagarde on Friday called it still far too soon to discuss the possibility of tapering the ECB’s asset purchases.

At a press conference during the Informal Ecofin, Lagarde was asked whether, against the backdrop of accelerated vaccination campaigns and economic reopening, there was any chance the ECB would have to consider tapering pandemic emergency purchase programme (PEPP) purchases in June.

‘We have seen recently increase in yields and we are very closely monitoring those matters’, she said. However, the ECB will make a new assessment on the basis of inflation prospects as reflected in the updated projections available next month, she said.

The ECB’s ‘commitment to the euro area is to maintain favourable financing conditions throughout the whole pandemic period, and that will guide our management of the pandemic emergency purchase programme’, she said.

Whereas ‘pandemics are uncertain’, she continued, ‘[w]hat is certain is that we are committed to preserving the favourable financing conditions using the PEPP envelope and to do so until at least March 2022. So it is far too early and it’s actually unnecessary to debate longer-term issues. Our focus in June is going to be on favourable financing conditions offered to the economy at large and to all sectors in the context of the inflation outlook.’

She noted that she had ‘repeatedly said that policymakers need to provide the right bridge across the pandemic well into the recovery, so that we can actually deliver on our mandate. And that’s what we will do. This will be the focus.’

As for the various indications of an improving economic context, ‘[t]here were quite a lot of factors and development that we are seeing at the moment that were actually already included in our previous projection from last March’, she said.

Moreover, while pre-pandemic output levels would be regained next year, the recovery is uncertain and uneven, she said. For this reason, policy support ‘will continue to be necessary in the months to come in order to make sure that recovery is actually well underway’, she said.

This year’s higher inflation is ‘of a temporary nature’ and will give way to more subdued readings next year, she reiterated. Therefore, ‘certainly from a policy point of view, we should see through that period of higher inflation’, she said.