The European Central Bank kept its emergency monetary stimulus unchanged as the region enters a critical phase in its recovery from the coronavirus crisis.
President Christine Lagarde and her colleagues held their pandemic bond-buying program at €1.35 trillion ($1.6 trillion) and the deposit rate at -0.5% on Thursday, maintaining the flood of liquidity that has calmed markets and kept borrowing costs low.
While officials are becoming more confident in the rebound from the worst economic shock in living memory, the upturn has slowed and new risks lie ahead. Infections are rising again and the stronger euro could weigh on inflation. Economists expect the ECB to increase and extend bond purchases later this year.
The ECB predicted a record 8.7% contraction for 2020 back in June. That figure will now show an improvement, according to a person familiar with the matter, and the overall forecasts through 2022 will be little changed.
Executive Board members Philip Lane and Isabel Schnabel both said recently that data seen over the summer months more or less confirm the June projections.