According to Christine Lagarde, the EU economy will gain momentum in the second half of 2021. The improvement is facilitated by the lifting of restrictive measures imposed to curb the coronavirus pandemic.
Additionally, the recovery is going to be much faster thanks to such factors as an increase in consumer spending, high global demand, and a soft fiscal and monetary policy. At the same time, Lagarde highlighted the uncertainty regarding the short-term economic prospects. They will largely depend on the situation with COVID-19.
The ECB President is sure that the acceleration of inflation in recent months was due to the low interest rate throughout 2020 and a spike in energy prices. In the second half of 2021, a further rise in consumer prices is expected, experts emphasize.
According to the ECB's forecasts, inflationary pressure is likely to increase in the near future. At the same time, it remains restrained against the background of the continuing weakness of the economy. Lagarde assumes that in the coming years, the inflation rate will be below the target of 2%.
The regulator has calculated that the eurozone economy will expand by 4.6% this year, by 4.7% in 2022, and by 2.1% in 2023. At the same time, the ECB raised the inflation forecast in the euro area for 2021 to 1.9%, for 2022 to 1.5%, and for 2023 it left it at the same level of 1.4%.
The Governing Council of the European Central Bank thinks that the key rate will also remain at the current level until the moment when inflation approaches the target of just below 2%.
The ECB has maintained the current volume of the Pandemic Emergency Purchase Program (PEPP) at the level of €1.85 trillion. The central bank believes that asset repurchases will be carried out at a higher rate than in the first months of 2021. According to Lagarde, at the moment, the reduction of the PEPP program is impractical.
The central bank will continue to buy assets under the PEPP until the end of March 2022. The ECB also plans to reinvest funds from redeemable state bonds under PEPP, which will last until the end of 2023.
