KOF Monetary Policy Communicator, April 2021

At today’s meeting, the Governing Council decided to keep the key ECB interest rates unchanged. Pur-chases under the PEPP over the current quarter will be conducted at a significantly higher pace com-pared to the first months of this year.

According to Eurostat, Euro area annual HICP inflation was 1.3% in March, up from 0.9% February. The main reason for this increase was a strong increase in energy price inflation. The ECB expects higher but somewhat volatile headline inflation in the coming month due to changing dynamics of idiosyncratic and temporary factors. Overall, underlying price pressures are expected to remain subdued reflecting low wage pressures, weak demand and the past appreciation of the euro. However, underlying price pressures are expected to increase somewhat this year, owing to short-term supply constraints and a recovery in domestic demand.