Euro Area Interest Rate1998-2021 Data | 2022-2023 Forecast | Calendar | Historical

ECB policymakers agreed that headline inflation was at a very low level and that it continued to be distant from the ECB target, while a further appreciation of the euro posed risk to the inflation outlook, the accounts of the January's meeting showed. Looking ahead, the risks surrounding the Eurozone growth outlook remained tilted to the downside but had become less pronounced, due to positive news about the global economy, the agreement on future EU-UK relations and the launch of vaccination campaigns. However, the ongoing pandemic and its implications for economic and financial conditions continued to be sources of downside risk.

The European Central Bank left monetary policy unchanged during its January 2021 meeting, as policymakers took a wait-and-see approach following last month's decision to expand and extend its pandemic emergency programme. Still, policymakers showed readiness to take further action if necessary, as record COVID-19 infections and new lockdowns hit the Euro Area economy and as consumer prices remain in deflationary territory. The ECB left its main interest rate at 0.0% and maintained its PEPP quota at 1.85 trillion euros with the buys to run at least until March 2022.

The European Central Bank is expected to leave monetary policy unchanged during its 1st meeting of 2021, after expanding its Pandemic Emergency Purchase Programme (PEPP) by another €500 billion and extending it to at least the end of March 2022 last month. However, investors see the central bank reiterating its commitment to adjust policy as and when necessary, leaving the door open to further stimulus, amid mounting infections and fresh lockdowns. Traders will also keep an eye on ECB President Lagarde comments at the regular press conference regarding the near-term outlook and risks surrounding the baseline scenario. The pandemic is far from controlled in Europe and countries continue to tight restrictions but some downside risks have faded since last month: coronavirus vaccination rollout already began although at a slow pace and a Brexit deal has been done.

European Central Bank policymakers agreed that the expansion and extension of PEPP purchases and the recalibration of the TLTRO III conditions were the most suitable tools to ensure that financing conditions remained favorable throughout the pandemic, the accounts of the December's meeting showed. However, there was a number of officials calling for a more moderate increase in the PEPP envelope on the argument that significant space for purchases was still available from past decisions and that in an environment of high uncertainty it was worth “keeping some powder dry” by maintaining the option to further adjust the envelope in the future. They also noted that the PEPP envelope may not be used in full. In December, the ECB expanded its pandemic emergency purchase programme by another €500 billion and extended it to at least the end of March 2022, aiming to support the Eurozone's struggling economy amid the coronavirus crisis.