The European Central Bank has pledged to ramp up purchases of government bonds in the upcoming months to contain the rise in yields. The Governing Council believes that tightening financial conditions could derail the economic recovery in the region.
The accompanying statement indicates that the Governing Council expects a more significant increase in PEPP procurement in the next quarter compared to the first months of this year. The committee will procure flexibly following market conditions and with the intention to prevent the tightening of financing conditions.
After the release of the statement, European bonds rose, with Italian bonds taking the lead. The IT10YT yield fell nearly 10 basis points to 0.58%. The German Bonds at the same time lost about 8 basis points and fell to -0.36%.
In a press conference, Christine Lagarde said that the ongoing vaccination campaigns, together with the gradual easing of containment measures, are ruling out any further adverse events associated with the pandemic and underpinning expectations for a sustained recovery of economic activity throughout 2021.
She says, "Preserving favorable financial conditions over the pandemic period remains essential." "Financing conditions are defined by a holistic and multifaceted set of indicators, spanning the entire transmission chain of monetary policy from risk-free interest rates and sovereign yields to corporate bond yields and bank credit conditions."
The economic forecast has remained unchanged since the December meeting. The GDP growth is expected at 4% in 2021. Inflation will not exceed 1.5%.
After the meeting, the euro slightly fell to 1.1940.
The DAX is trading 0.30% higher just above the 14.583 level.
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