ECB's Panetta says that the conditions that we see today do not justify reducing the pace of purchases, and a discussion about phasing out the PEPP is still clearly premature

• Says, he has not seen changes in financing conditions or the economic outlook that would shift the inflation path upwards; financing conditions are tightening. In this environment, it is not surprising that we have also seen a persistent, non-negligible appreciation of the exchange rate, which – if sustained – would weaken inflationary pressures


• Will see what the recovery will look like six or nine months from now, and what happens to inflation and inflation expectations.


• "I am concerned by the fact that, over our policy horizon, inflation is going to remain well below our objective of 2%. This may affect our credibility after so many years of inflation “misses”."


• The output gap, the employment gap and the inflation gap are the key variables to determine when we have truly gone beyond the pandemic phase. They are expected to gradually narrow, but they are still far from satisfactory.


• Link to release

Reaction details (07:15)

• Subsequently, some modest pressure was seen in EUR/USD dropping below 1.2250 on these remarks which explicitly mention the FX rate and follows dovish rhetoric from Stournaras and Villeroy yesterday.

26 May 2021 - 07:02- Fixed IncomeEconomic Commentary- Source: ECB