ECB Renews Pledge on Faster Buying to Ensure Crisis Rebound
Comment of the Day

June 10 2021

Commentary by Eoin Treacy

ECB Renews Pledge on Faster Buying to Ensure Crisis Rebound

This article from Bloomberg may be of interest to subscribers. Here is a section:

While Lagarde also unveiled forecasts that showed faster growth and inflation both this year and next, she insisted that price pressures in the economy “remain subdued.”

The ECB’s continued emergency easing is likely to presage a similar move by the Federal Reserve next week not to start winding down stimulus, in a two-pronged policy push to ensure recoveries from the pandemic can be assured.

ECB purchases have been conducted at a pace of roughly 19 billion euros a week since March, up from 14 billion euros earlier in the year. Thursday’s decision suggests they are likely to continue at or close to that higher clip until the recovery firms. Most economists don’t expect a reduction until September.

Eoin Treacy's view

Amid all the talk of tapering over the last couple of weeks, there has been no mention of how deleterious higher yields are to government finances. We have already seen meaningful moves higher in yields this year. That has stoked inflationary fears but ultimately, the move was about supply and demand. The US Treasury has been issuing bonds at a quick pace to fund the latest round of stimulus and the bond market has experienced indigestion so bond yields rose.

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