In a blog post, ECB President Christine Lagarde said she expects net asset purchases under the APP to “end very early in the third quarter”. “This would allow us a rate lift-off at our meeting in July, in line with our forward guidance,” she said.

Also, “based on the current outlook, we are likely to be in a position to exit negative interest rates by the end of the third quarter,” she added.

Looking forward, the “next stage” of monetary policy normalization would “need to be guided by the evolution of the medium-term inflation outlook”.

“If we see inflation stabilizing at 2% over the medium term, a progressive further normalization of interest rates towards the neutral rate will be appropriate,” she said. “But the pace and overall scale of the adjustment cannot be determined ex ante.”

Full blog post here.

In a speech overnight, ECB Executive Board member Piero Cipollone suggested that additional tightening of monetary policy may not be necessary to rein in inflation. His remarks hint at a potentially less restrictive approach going forward, should inflationary pressures continue to subside.

Cipollone emphasized that the current economic conditions, “with demand still weak and inflation expectations anchored”, arguing against the need for monetary policy to “generate further slack to keep inflation in check”. This perspective underlines a significant shift from aggressive tightening to a more measured stance, possibly preparing the ground for a more accommodative monetary policy in the near future.

Unwinding of supply shocks offers room for demand to pick up “without fuelling inflation”. Additionally, the downturn in energy prices could allow for “some wage catch-up, especially if profits normalize.”

However, Cipollone also stressed the importance of a balanced approach to policy-making, pointing out that the path to the ECB’s inflation target would depend on a complex interplay of economic factors. Consequently, he advocated for a “data-driven” approach to future monetary-policy decisions.

Full speech of ECB’s Cipollone here.

ECB let interest rates unchanged today as widely expected. That is, main refinancing rate, marginal lending facility and deposit facility rates are held at 0.00%, 0.25% and -0.40% respectively.

ECB maintained forward guidance that interest rates will “remain at their present levels at least through the summer of 2019”.

Also, the asset purchase program will end this month as scheduled.

Full statement below:

Monetary Policy Decisions

At today’s meeting the Governing Council of the European Central Bank (ECB) decided that the interest rate on the main refinancing operations and the interest rates on the marginal lending facility and the deposit facility will remain unchanged at 0.00%, 0.25% and -0.40% respectively. The Governing Council expects the key ECB interest rates to remain at their present levels at least through the summer of 2019, and in any case for as long as necessary to ensure the continued sustained convergence of inflation to levels that are below, but close to, 2% over the medium term.

Regarding non-standard monetary policy measures, the net purchases under the asset purchase programme (APP) will end in December 2018. At the same time, the Governing Council is enhancing its forward guidance on reinvestment. Accordingly, the Governing Council intends to continue reinvesting, in full, the principal payments from maturing securities purchased under the APP for an extended period of time past the date when it starts raising the key ECB interest rates, and in any case for as long as necessary to maintain favourable liquidity conditions and an ample degree of monetary accommodation.

The President of the ECB will comment on the considerations underlying these decisions at a press conference starting at 14:30 CET today.