MNI STATE OF PLAY: ECB To Stay Vague On H2 Bond Buying

The European Central Bank will stress at its press conference on Thursday that it will adjust the pace of the EUR1.85 billion Pandemic Emergency Purchase Programme if tested by the market, but President Christine Lagarde is likely to avoid being drawn on whether it could slow bond buying later in the year as the economy improves.

April's meeting of the European Central Bank's Governing Council is unlikely to deliver major changes following last month's announcement of a front-loaded "significant" increase in bond-buyingin order to maintain favourable financing conditions, which has so far disappointed some market observers even as yields have been contained. But hawkish voices questioning when the ECB will judge the Covid-19 pandemic's crisis phase to have ended have become more prominent.

The growth and inflation outlook has not changed meaningfully since last month, and Lagarde may point to the Eurosystem's June macroeconomic projections as an opportunity to more fully assess the speed of recovery. The balance of risk, upgraded to "more balanced" last time round, remains broadly similar, as easing lockdown conditions are partially offset by Europe's relatively slow, if improving, vaccine rollout.

NEXT GENERATION EU

Lagarde is likely to repeat that considerable monetary policy support will be needed for a long time to come,, with the ECB ready to deploy all its tools. The ECB has indicated it intends to look through temporary spikes in inflations.

The ECB president will again face questions on the level of the euro - which it does not target, but is "closely monitoring", and will urge swift deployment of Next Generation EU funds and a continued expansive fiscal stance from eurozone member states.