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ECB Review: March 2021 - An Evolving Reaction Function

An Evolving Reaction Function

As expected, the ECB made no changes to its overall monetary policy stance and, beyond the upward revision to the 2021 inflation forecast (largely a mechanical uplift reflecting technical factors), there were minimal adjustments in the latest staff macroeconomic projections. The standout announcement was the commitment to significantly increase the pace of weekly PEPP purchases during the second quarter. While some have interpreted this as a dovish development, the lack of clarity on how the ECB measures financing conditions and what levels are deemed 'favourable' has left the market wanting.

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ECB Review March 2021.pdf

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