The European Central Bank kept its policy rates steady on Thursday as it maintained that the uptick in inflation is transitory.
- The ECB left its ultra-low interest rates unchanged — the headline eurozone rate at 0% and deposit rate at -0.5%.
- It maintained its 1.85-trillion euro bond-buying program until March 2022 under the Pandemic Emergency Purchase Program (PEPP).
- ECB President Christine Lagarde said inflation will likely continue to accelerate in the second half but decline as drivers taper down.
- Lagarde attributed the uptick to base effects, transitory factors, and the hike in energy prices.
- The ECB revised upward its inflation forecast for 2021 to 1.9% and for 2022 to 1.5%.
- Projections indicate a gradual increase in underlying pressures but the ECB maintained that these remain subdued.
- The gross domestic product (GDP) outlook was also upgraded to 4.6% for 2021 and 4.7% for 2022.