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By Swissquote Analysts
Morning News

ECB Keeps Monetary Stimulus on Track Amid Recession Concerns

The European Central Bank will keep its aggressive monetary stimulus in place and lag the Federal Reserve in phasing it out, ECB President Christine Lagarde said, as the eurozone wrestles with a fresh wave of Covid-19 infections that likely tipped the bloc back into recession early this year. A resurgence of the pandemic in Europe and a sluggish rollout of vaccines have kept businesses shut across swaths of the Continent, driving a divergence with the U.S. economy, which is benefiting from a hefty dose of government spending and speedier Covid-19 vaccinations. At a news conference, Ms. Lagarde said the eurozone economy wouldn't return to its pre-pandemic size until the second half of next year. That would be more than a year after the Congressional Budget Office expects the U.S. economy to have regained its precrisis size. Divergence between the ECB and Federal Reserve, arguably the world's two most influential central banks, has sweeping implications for the prices of bonds and other financial assets. "If you look at where the Fed is, and where we are, if you look at expectations in the United States and the euro area, we are not on the same page," Ms. Lagarde said. The ECB said in a statement Thursday that it would keep its key interest rate at minus 0.5% and continue to buy eurozone debt under an emergency EUR1.85 trillion bond-buying program, equivalent to $2.2 trillion, through at least March 2022.