Braking Down The News

ECB to Keep Monetary Stimulus in Place

Central bank upgraded its economic outlook for the eurozone

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FRANKFURT—-The European Central Bank upgraded its economic outlook for the eurozone but said it would keep its aggressive monetary stimulus in place, signaling a possible divergence with the Federal Reserve, which could begin discussing an eventual wind-down of its pandemic-driven easy-money policies next week.

At a news conference on Thursday, ECB President Christine Lagarde said she expects a robust bounceback in economic activity across the continent as the pace of Covid-19 vaccinations picks up and stores and restaurants reopen.

She cautioned that the region’s economic recovery lags behind that of the U.S., however, with more than one European in seven still unemployed or on furlough from their job. U.S. inflation surged to 5% in May on an annual basis, the highest annual inflation rate in nearly 13 years, compared with only 2% in the eurozone.

The U.S. and eurozone “start from a completely different base, the fiscal stimulus [programs] are of a different magnitude,” and inflationary pressures are “of a completely different magnitude,” Ms. Lagarde said.

While the U.S. economy may already have surpassed its pre-pandemic size, the eurozone isn’t expected to make up the ground lost to the pandemic until next year.

 

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