Yahoo Finance's Latoya Harding breaks down the European Central Bank's latest announcement on interest rates and bond purchasing.
- Let's check in on the market action across the pond here. We've got an interesting update earlier today from the European Central Bank, which kept its policy position unchanged, but did opt to slow down the pace of asset purchases. No temper tantrum here though. I mean, not really. And for more on that, I want to bring I'm Yahoo Finance's, LaToya Harding, who has the latest there for us. LaToya.
LATOYA HARDING: Yeah, that's right. As you mentioned, the European Central Bank decided to slow the pace of its Pandemic Emergency Purchasing program. And that all comes in a move that ECB president Christine Lagarde said was not quite tapering but more so recalibrating. Now, the bank said the step towards unwinding the program was going to be at a moderately slower pace, and that the PEP package still remained at 1.85 trillion euros.
Now the program was first put in place in March 2020 to support to the eurozone economy through the pandemic, and it is due to end in March 2022. It had been buying around 80 billion euros of bonds per month and after the ECB raised the pace in March. But analysts predicted that purchases would fall between 60 to 70 billion euros in the next few months. So the news didn't come really as a shock to the markets.
Now in addition to this, the ECB did hold its interest rates at 0.0% as widely expected by economists. But it did lift its growth and inflation forecasts for the year. Inflation spiked to 3% in August, up from 2.2% in July. But the ECB said that it is set to drop below its 2% target in 2022 and 2023. So that's across the medium term.
Christine Lagarde also at the press conference after the announcement pointed to a stronger recovery this year with GDP expected to rise 5%, and that's up from 4.6%. But she did say that the downside risks to growth did still center around of course, the coronavirus pandemic, the spread of the Delta variant, and also the eurozone's progress with vaccinations as well.
- LaToya Harding bringing us the very latest out of the ECB this morning. Thanks so much for that.