Market comment - ECB gives mixed messages on transitory pick-up in inflation

Davy Research
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Yesterday’s ECB decision to keep rates on hold and maintain the pace of asset purchases was expected, as was the dovish tone of the press conference. The ECB raised its forecast for euro area GDP growth to 4.6% and inflation to 1.9% in 2021 on the vaccine rollout and further price pressures. However, Christine Lagarde gave mixed messages as she set out the Council’s view that any pick-up in inflation will be transitory, conceding that the ECB is concerned that hysteresis, lingering supply side effects from COVID-19 or spillovers from the global economy could fuel euro area inflation.