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The European Central Bank left interest rates unchanged at its meeting yesterday, not to mention maintained the current volume of bond purchases.
The decision came because according to Christine Lagarde, signs of recovery are already visible and growth is projected to accelerate this mid-year. Plausibly, quarantine measures will also be lifted, which will also speed up recovery.
Unsurprisingly, a debate was opened on whether the Central Bank should reduce bond purchases already, despite the fact that borrowing costs may rise.
Back in March, the ECB opted to increase its purchases for this quarter. Now, many members are requesting to reduce them for the third quarter.
In line with this, Lagarde was repeatedly asked to detail the future movements of the bank, but she responded that decisions will depend on real data.
Most likely, the ECB will exhaust its procurement quota before ending the program. Therefore, the meeting this June is important because it would determine whether the bank can scale back the € 1.85 trillion ($ 2.22 trillion) PEPP program early next year.
Dutch politician Klaas Knot, one of the most conservative members of the Governing Council, already said that there is a chance that bond purchases will be curtailed this June.
Other politicians disagreed, arguing that downsizing it early is risky.
In any case, deposit and base rates will remain at -0.5% and 0%, respectively.
This is in contrast with other central banks who have begun raising them. For example, the Bank of Canada said it would increase interest rates and cut the volume of its bond purchases in late 2022.
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