PRIMER: ECB's account of the December 16th meeting due to be published at 12:30GMT/07:30EST

As expected, policymakers opted to stand pat on rates. As had been signalled by the ECB, purchases under PEPP will cease at the end of March 2022. Reinvestments were extended until 2024 and purchases under PEPP could also be resumed, if necessary, to counter negative shocks related to the pandemic. On APP, as of Q2 2022, monthly purchases will 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 "for as long as necessary to reinforce the accommodative impact of its policy rates". With regards to APP, the programme was not given any of the flexibility criteria seen under PEPP. Elsewhere, policymakers opted to maintain the linkage between APP and rate increases whereby the Governing Council expects net purchases to end shortly before it starts raising the key ECB interest rates. At the press conference, President Lagarde noted that although there are near-term headwinds, activity in the Eurozone is expected to pick up strongly in 2022. On inflation, Lagarde stated that in the medium-term, inflation is expected to come in below target. This was reflected in the subsequent staff economic projections which pencilled in 2023 and 2024 inflation at 1.8%. In the near-term, 2021 was upgraded to 2.6% from 2.4% and 2022 to 3.2% from 1.7% (it is worth noting that the cut-off point for the projections was prior to the emergence of the Omicron variant). In terms of the policy decisions made, Lagarde revealed that more than one member did not agree on the parameters, but there was a very large majority. On rates, the President continued to reaffirm that rates are unlikely to rise in 2022. Following the press conference, ECB sources revealed that it was the Austrian, Belgian and German governors who disagreed with parts of the ECB's decision. The hawks were reportedly unhappy with extending the PEPP reinvestment to 2024 and not setting an APP end-date. They also disagreed on the inflation outlook and some stressed risks were to the upside. Given that source reports have already outlined the extent of the disagreement on the Governing Council and the macro landscape has shifted in recent weeks amid the spread of Omicron, the upcoming account will be deemed by some in the market as stale.

20 Jan 2022 - 08:06- Fixed Income- Source: Newsquawk