ECB to Speed Up Bond Purchases

A sharp divergence in near-term economic prospects between the U.S. and the eurozone has put the ECB in a tougher spot than the Fed, which signaled recently that it wouldn’t seek to stem a rise in Treasury yields. A sluggish rollout of Covid-19 vaccines on the continent has triggered a return of social restrictions that are delaying Europe’s recovery from last year’s historic downturn, even as a $1.9 trillion fiscal stimulus looks set to turbocharge U.S. economic growth.

Meanwhile, brighter investor sentiment around the world is pushing up global borrowing costs. That creates a headache for ECB officials who worry that an excessive increase in household and business financing costs could undermine the region’s recovery before it begins.

Following the ECB’s announcement, yields on 10-year German bunds fell to minus 0.35% from minus 0.32% earlier in the day. The euro was 0.3% stronger against the dollar, near where it traded before the ECB statement. One euro bought $1.1961.

ECB President Christine Lagarde will provide insights into the central bank’s decision at a news conference starting at 8:30 a.m. ET, where she will also unveil fresh forecasts for eurozone economic growth and inflation through 2023. Investors will listen closely for clues as to whether the central bank might take further steps to propel the economy through a tough patch.

Write to Tom Fairless at [email protected]