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The European Central Bank reported an even greater rise in inflation on Thursday, but said it would continue stimulating the economy because of fears that easing aid programs may halt recovery.
ECB President Christine Lagarde said policymakers agreed to make additional emergency purchases at a faster pace next quarter, but did not provide further details on the plan. She disclosed though that the central bank will do this in the next three months, since liquidity is usually low in Europe during summer.
The eurozone, which consists of 19 countries, relies on copious printing of money by the ECB to finance its growing government deficit. Hence, a curtailment of stimulus would make the economy particularly vulnerable.
And in this quarter, the PEPP program bought € 80 billion, which is much higher than the $ 62 billion the previous quarter. The ECB said this program will last until March 2022, regardless of the quota.
Aside from that, macroeconomic projections were raised for the better, thanks to the improvement in the COVID-19 situation. Vaccination programs in the region have accelerated, increasing the likelihood that sectors will bounce back as quarantine restrictions relax.
Output is expected to jump to 4.6%, and then to 4.7% next year. Meanwhile, inflation will jump to 1.9% this year, and then to 1.5% next year.
However, Europe's recovery is lagging behind the United States, so any withdrawal of support will be risky.
*The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade.
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