ECB's Lagarde: Tightening would be premature and would pose risk to ongoing recovery

The outlook for the euro area economy is brightening as the pandemic situation improves, Christine Lagarde, President of the Europen Central Bank (ECB), said on Monday, as reported by Reuters.

Additional takeaways

"We expect the economic activity to accelerate as of this quarter."

"The spread of virus mutations continues to be a source of risk."

"As the recovery is gathering pace, we need to remain vigilant and ensure that policy support continues to provide a bridge over the pandemic and well into the recovery."

"Brighter prospects for global demand and a faster-than-anticipated increase in consumer spending could result in an even stronger recovery."

"Asset purchases and TLTRO will cumulatively increase inflation by around 1.2 percentage points and real GDP growth by around 1.8 percentage points between 2020 and 2023."

"Tightening would be premature and would pose a risk to the ongoing economic recovery and the outlook for inflation."

"The upward effect of the underlying inflation pressures on headline inflation will be roughly counterbalanced by the expected decline in energy prices."

"Effects on euro area HICP inflation from the US inflation are expected to be moderate."

Market reaction

The EUR/USD pair clings to daily recovery gains following these comments and was last seen rising 0.45% on the day at 1.1915.