STATE OF PLAY: ECB To Up Bond-Buying, But Questions Remain

The European Central Bank announced a "significant" second-quarter increase in the pace of its pandemic emergency purchase programme in response to tumbling global bond prices, but left question marks over the extent of its commitment to keeping a lid on yields by stopping short of providing a definition of the "favourable financing conditions" catchphrase.

ECB President Christine Lagarde said the change in the pace of bond-buying was made with the "full consensus" of the Governing Council.

While investors have sought more clarity on what the ECB means by the "favourable financing conditions" it says it aims to maintain via its PEPP programme, she said only that it is based on multiple indicators.

The euro area growth outlook has become "more balanced" since the beginning of the year, but short-term downside risks remain, Lagarde said.

March's Eurosystem staff inflation projections were revised up 0.5 percentage point on December's print to 1.5% for 2021, up 0.1 point to 1.2% for 2022, and were unchanged at 1.4% for 2023. Growth projections ticked up 0.1 to 4.0% this year, down 0.1%to 4.2% for 2022, and were unchanged at 2.1% for 2023.

Lagarde said the ECB continues to keep a watchful eye on the euro exchange rate, but does not target any specific level, merely its impact on the economy.