ECB Leaves Rates Unchanged, See Risks Economy Broadly Balanced

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    Helmholtz Watson

    ECB left rates unchanged as expected in September….


    Helmholtz Watson

    September 28 – Bloomberg (Jana Randow and Alexander Weber): “President Christine Lagarde said the European Central Bank should be wary of withdrawing stimulus too quickly, reasserting her view that inflation isn’t getting out of control in the euro area. There are ‘no signs that this increase in inflation is becoming broad-based across the economy,’ Lagarde said… ‘The key challenge is to ensure that we do not overreact to transitory supply shocks that have no bearing on the medium term.’”

    Helmholtz Watson

    September 29 – Reuters (Balazs Koranyi and Francesco Canepa): “Supply constraints thwarting global economic growth could still get worse, keeping inflation elevated longer, even if the current spike in prices is still likely to remain temporary, the world’s top central bankers warned… The disruptions to the global economy during the pandemic have upset supply chains across continents, leaving the world short of a plethora of goods and services from car parts and microchips to container vessels that transport goods across the seas. ‘It’s … frustrating to see the bottlenecks and supply chain problems not getting better, in fact at the margin apparently getting a little bit worse,’ …Jerome Powell told a conference. ‘We see that continuing into next year probably and holding inflation up longer than we had thought,’ Powell told the European Central Bank’s Forum on Central Banking. Speaking alongside Powell, ECB chief Christine Lagarde voiced similar concerns, arguing that the end of these bottlenecks, once thought by economists to be just weeks away, is uncertain. ‘The supply bottlenecks and the disruption of supply chains, which we have been experiencing for a few months … seem to be continuing and in some sectors accelerating,’ Lagarde said. ‘I’m thinking here about shipping, cargo handling and things like that.’”


    ECB chief economist Lane:

    There are very solid reasons to believe that there’s significant transitory components in the rise in inflation
    We still see medium term inflation well below target
    We’re seeing no wage pressure


    October 7 – Reuters (Balazs Koranyi):

    “European Central Bank policymakers debated a bigger cut in asset purchases last month and some even argued that markets may have already prepared for the end of emergency support, the accounts of their Sept 9 meeting showed… ‘It was argued that a symmetric application of the (Pandemic Emergency Purchase Programme) framework would call for a more substantial reduction in the pace of purchases,’ the ECB said. ‘From this perspective, a pace of purchases similar to the level prevailing at the beginning of the year would be appropriate.’”

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