In the post meeting press conference, ECB President Christine Lagarde acknowledged that ” market interest rates have increased since the start of the year, which poses a risk to wider financing conditions.”
“Banks use risk-free interest rates and sovereign bond yields as key references for determining credit conditions,” she explained. “If sizeable and persistent, increases in these market interest rates, when left unchecked, could translate into a premature tightening of financing conditions for all sectors of the economy”.
“This is undesirable at a time when preserving favourable financing conditions still remains necessary to reduce uncertainty and bolster confidence, thereby underpinning economic activity and safeguarding medium-term price stability.”
In the baseline scenario of the new economic projections, Eurozone GDP growth is expected to be at 4.0% in 2021, 4.1% in 2022, and 2.1% in 2023. Outlook is “broadly unchanged” comparing to December projections. Risks over medium term “have become more balanced” even though downside risks remains in the near term.
Annual inflation is projected to be at 1.5% in 2021, 1.2% in 2022, and 1.4% in 2023. The outlook for 2021 and 2022 was revised up, “largely due to temporary factors and higher energy price inflation.
