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ECB to taper pandemic buys after Sept: Poll

July 14, 2021 00:00:00

BENGALURU, July 13 (Reuters): The European Central Bank will start tapering its pandemic-related asset purchases after its September meeting and stop buying them by the end of March, according to a Reuters poll which showed the top economic risk was new COVID-19 variants.

After announcing a new strategy last week that allows the central bank to tolerate inflation higher than its new 2 per cent symmetric target, ECB President Christine Lagarde said on Monday the bank would change its policy guidance at its July 22 meeting.

While those announcements came against a backdrop of slightly more optimistic growth and inflation forecasts for this year and next, high unemployment rates in most euro zone countries are underscoring the need for caution.

Just over 70 per cent of economists, or 36 of 51, who responded to an additional question in the July 5-12 poll said the ECB would start tapering its Pandemic Emergency Purchase Programme (PEPP) after the September meeting, up from nearly 63 per cent last month.

All of the 1.85 trillion euro PEPP envelope would be used up, according to the consensus view of 39 economists, with the lowest expectation pencilled in at 1.5 trillion euros.

"Judging from the current monthly pace of purchases, our assumption of only a gradual reduction of this pace after September, and in the remaining time until March, the envelope will likely be used in full," said Salomon Fiedler, European economist at Berenberg.

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