ECB Speeds €1.85T Stimulus Program as Lagarde Frets Over 'Premature Tightening'

The overall program's size was left intact, along with the March 2022 end date, but the pace of stimulus is now set to increase.

AccessTimeIconMar 11, 2021 at 2:29 p.m. UTC
Updated Sep 14, 2021 at 12:24 p.m. UTC
10 Years of Decentralizing the Future
May 29-31, 2024 - Austin, TexasThe biggest and most established global hub for everything crypto, blockchain and Web3.Register Now

The European Central Bank (ECB) said Thursday it would "significantly" accelerate a plan to buy as much as €1.85 trillion (US$2.2 trillion) of government bonds, addressing concerns that a recent tightening of financial conditions, in the form of rising market yields, might derail the region's economic recovery.

The accelerated bond purchases will come under the central bank's Pandemic Emergency Purchase Program (PEPP), a monetary-stimulus effort similar to the Federal Reserve's "quantitative easing" asset purchases in the U.S. The PEPP is set to end in March 2022, but the pace of the bond purchases will now accelerate, according to a press release from the ECB.

"Market interest rates have increased since the start of the year, which poses a risk to wider financing conditions," ECB President Christine Lagarde said in prepared remarks. "If sizable and persistent, increases in these market interest rates, when left unchecked, could translate into a premature tightening of financing conditions for all sectors of the economy."

The extended bond purchasing program is expected to continue until the ECB Governing Council "judges that the coronavirus crisis phase is over,” the ECB said.

“Markets have been looking for clarity from the ECB in the past few weeks amid conflicting messages, and it seems as if the central bank has listened. The introductory statement now sends a clear signal that PEPP purchases will be increased through Q2, as we expected,” said Claus Vistesen, chief eurozone economist at Pantheon Macroeconomics, in an email.

Prospects for higher inflation and rising yields have been closely watched by cryptocurrency investors. Bitcoin is increasingly seen by big institutional investors as a potential inflation hedge, in the face of trillions of dollars of pandemic-related economic stimulus from governments and central banks around the world.

Disclosure

Please note that our privacy policy, terms of use, cookies, and do not sell my personal information has been updated.

CoinDesk is an award-winning media outlet that covers the cryptocurrency industry. Its journalists abide by a strict set of editorial policies. In November 2023, CoinDesk was acquired by the Bullish group, owner of Bullish, a regulated, digital assets exchange. The Bullish group is majority-owned by Block.one; both companies have interests in a variety of blockchain and digital asset businesses and significant holdings of digital assets, including bitcoin. CoinDesk operates as an independent subsidiary with an editorial committee to protect journalistic independence. CoinDesk offers all employees above a certain salary threshold, including journalists, stock options in the Bullish group as part of their compensation.


Learn more about Consensus 2024, CoinDesk's longest-running and most influential event that brings together all sides of crypto, blockchain and Web3. Head to consensus.coindesk.com to register and buy your pass now.