PRIMER: Account of the ECB’s March 11th policy announcement to be released at 12:30BST/07:30EDT

Amid a backdrop of rampant inflation in the Eurozone and the potential for further upside in the coming months, the ECB opted to revise its schedule for APP in a more hawkish direction. Previously, it was announced that monthly purchases under APP would be beefed up to EUR 40bln from EUR 20bln and then subsequently lowered to EUR 30bln in Q3 and back down to EUR 20bln in Q4, with no-end date provided. The new schedule now sees APP increased to EUR 40bln from EUR 20bln in April before being lowered to EUR 30bln in May and EUR 20bln in June. Furthermore, purchases under APP will be concluded in Q3, albeit the schedule could be re-revised if the economic outlook warrants an adjustment. Policymakers also opted to break the linkage between APP and rate hikes with any adjustments to the key ECB interest rates set to take place “some time” after the end of the Governing Council’s net purchases under the APP compared to prior guidance of “shortly” after. At the follow-up press conference, introductory remarks by President Lagarde emphasised the uncertainty presented by the conflict in Ukraine, suggesting that the war will have a material impact on activity and inflation, the extent of which will depend on the evolution of the conflict (note, the ECB outlined several scenarios for the Eurozone outlook). Accordingly, the ECB now characterises risks to the economic outlook as “tilted to the downside” vs. its previous assessment of “broadly balanced”. The accompanying staff economic projections saw a downgrade to 2022 growth from 5.2% to 3.7% with 2023 revised trivially lower. On the inflation front, 2022 HICP is now seen at 5.1% vs. prev. 3.2%, 2023 is forecast at 2.1% vs. prev. 1.8% before returning below target to 1.9% in 2024 - Reuters sources later added that policymakers agreed that 1.9% inflation forecast for 2024 is compatible with target. In terms of the policy decision, Lagarde noted that some members wished to “do nothing” amid the uncertainty, whilst other more hawkish members did not want to apply conditionality to the decisions. Note, the sources also noted a handful of policymakers made the case for keeping APP open-ended; any colour on this debate will be useful for market participants. With regards to a 2022 rate hike, Lagarde gave little away on that front, suggesting that “some time” after could mean a “week or months”. Any more specificity on the timings of rate hikes will be carefully eyed.

07 Apr 2022 - 07:55- Fixed IncomeImportant- Source: Newsquawk