LONDON (Reuters) – The ramping up of Europe’s COVID-19 vaccine programmes and reopening of economies were already factored into the European Central Bank’s last set of forecasts in March, the bank’s chief economist, Philip Lane, said on Wednesday.
“The fact that Europe is going to have a big acceleration in vaccinations in these weeks, that was built in. The fact that Europe is going to have a big unlocking of the economy in the coming weeks, that’s built in,” Lane said during an online panel hosted by think tank OMFIF.
While other developments such as the scale of U.S. fiscal stimulus and the spike in COVID-19 cases in India had not been factored in, Lane said, the ECB remained focused on keeping financing conditions highly supportive.
He said persistently high inflation was unlikely to grip the 19-country euro zone any time soon and that inflation and financing conditions would have to heat up sufficiently before the ECB considers dialling down stimulus.
Focus has turned to when the ECB might start winding down its 1.85-trillion euro ($2.22-trillion) pandemic emergency bond buying programme (PEPP) as the acceleration of Europe’s vaccine programmes raises hopes that 70% of the bloc’s population – a rough threshold for herd immunity – will be inoculated by the end of the summer.
PEPP, which gives the bank flexibility over what, when and how much it buys in the bond market, has allowed the ECB to buy the debt of the countries that need the most support, but its conventional asset purchases are limited by pre-determined quotas.
Asked whether the ECB could build that kind of flexibility into its pre-pandemic Asset Purchase Programme (APP) once PEPP is dialed down, Lane said: “It’s important not to dwell on any particular detail of any particular programme, because… we stand ready to adjust all of our instruments as appropriate to deliver that (inflation) target.”
For a graphic on European Union vaccinations speed up:
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