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No rate hikes before 2024 – UOB

The UOB Group economist Lee Sue Ann comments on the latest ECB event September 9.

Key comments

“Amid the economic recovery, as well as rising inflation in the eurozone, financial markets have been anxiously awaiting the latest policy decision from the European Central Bank (ECB) looking for signs of an imminent withdrawal of stimulus from the it was pandemic. On Thursday (September 9), you left the policy settings unchanged, but chose to modify its language in the Pandemic Emergency Purchase Program (PEPP).

“In terms of macroeconomic projections, the ECB considers that inflation is being pushed up largely by temporary factors which are expected to fade in the next few years. “

“It is worth noting that the President of the ECB, Christine Lagarde, showed a somewhat new open mind to higher inflation. He listed several reasons as to why the current rise in inflation is temporary and underscored the ECB’s expectation that underlying inflationary pressures would increase only gradually. “

“Overall, the last ECB meeting was in line with our expectations, as ‘communicated’ its plan to slow down PEPP purchases ‘moderately’. This leaves most of the big policy decisions to the December meeting, when the ECB will also present its forecasts for 2024. “

“In addition, we also continue to expect a prolonged accommodative monetary policy through a more flexible and broader PPP, and that the ECB is unlikely to raise interest rates before 2024“.

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