ECB sees eurozone real GDP shrinking in Q1, inflation rising: Christine Lagarde

Mar. 11, 2021 8:54 AM ETVanguard FTSE Europe ETF (VGK), FXE, FEZ, EUOVGK, FEZ, FXE, EUOBy: Liz Kiesche, SA News Editor
  • Real GDP in the eurozone is likely to contract in Q1, Christine Lagarde, president of the European Central Bank said in her post-monetary decision press conference.
  • Risks over the medium term have become more balanced, she said, but downside risk remains in the near term.
  • Compared with the central bank's prior forecasts, its economic growth outlook is broadly unchanged, she said. The ECB expects 4% real GDP growth in 2021, 4.1% in 2022, and 2.1% in 2023.
  • Headline inflation is likely to increase in coming months, she said. However, "these factors can be expected to fade out early next year" and "pressures are expected to remain subdued overall."
  • As a result the ECB boosts its inflation forecast for this year, to 1.5% vs. prior view of 1.0%; outlook for 2022 inflation is 1.2%, up a tick from its previous 1.1% forecast; and sees 2023 inflation at 1.4%, unchanged from the prior view.
  • Euro is up 0.2% against the U.S. dollar; as such the Invesco CurrencyShares Euro Currency Trust (NYSEARCA:FXE) rises 0.2% in premarket trading in New York.
  • 9:30 AM ET: Press conference ends.
  • 9:28 AM ET: The ECB is "very carefully" monitoring the euro exchange rate to study its impact on the economy. "We're not targeting any specific exchange rate for the euro."
  • 9:20 AM ET: The ECB's forecasts don't include the potential effects of the $1.9T U.S. virus relief program. "We believe the Biden plan is going to have an impact," Lagarde said, and that will be incorporated into its next round of economic projections in June.
  • 9:12 AM ET: It is possible that inflation may hit 2% at the end of this year "because of some technical and temporary reasons," Lagarde said.
  • The ECB will "see through" any temporary inflation spikes.
  • 9:07 AM ET: "We're not doing yield-curve control," Lagarde said. "We're preserving favorable financing conditions."
  • "We probably have about EUR 1T left" in the PEPP envelope. If the ECB can do it with less, it will. If it needs to "recalibrate" the amount, it will, Lagarde said.
  • Update at 9:04 AM ET: The ECB announced in its monetary decision it will increase its pace of asset purchases under its PEPP program significantly in coming months. Lagarde said no specific number is in mind for that increase.
  • Other Europe-centric ETFs: VGK, FEZ, EUO

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