FRANKFURT 鈥� Facing unease over the spread of a more-contagious variant of the coronavirus, the European Central Bank said it would maintain its stimulus in the form of ultra-low interest rates until inflation 鈥渄urably鈥� reaches its 2% target.
The monetary authority for the 19 countries that use the euro said it would not back off its efforts to support the economy even if that resulted in a 鈥渢ransitory鈥� period of inflation moderately above target.
ECB President Christine Lagarde underlined the bank's determination to persist with supportive policy. She said that the recovery 鈥渋s on track鈥� but warned that the more-contagious Delta variant of the coronavirus 鈥渃ontinues to cast a shadow.鈥�
The bank鈥檚 policy meeting Thursday was the first to employ the bank鈥檚 new monetary policy strategy that analysts say will permit the bank to employ stimulus for longer periods.
The strategy abandoned the bank鈥檚 old inflation target of 鈥渃lose to but below鈥� 2% in
Annual inflation was 1.9% in June, but that figure is not the whole story. The ECB says it is boosted by temporary factors such as higher fuel prices. Core inflation, which leaves out volatile food and fuel, was only 0.9% and the ECB has consistently fallen short of its target in recent years. ECB Lagarde said Thursday that inflation remains 鈥渨ell below our target.鈥�
The bank otherwise left its key rates and stimulus programs unchanged.
The bank is purchasing 1.85 trillion euros in government and corporate bonds through at least March 2022 to help get the eurozone economy through the disruption caused by the pandemic. The purchases pump newly created money into the economy and help keep longer-term borrowing rates low. The idea is to make sure credit is easily available so companies can get the financing they need to keep going.
The bank鈥檚 key interest rate benchmarks affecting short-term rates are at record lows. It lends to private-sector banks at zero
Right now concerns in Europe focus on the spread of the Delta variant, which has seen case numbers rise sharply in a number of countries. Case numbers are low but rising in Germany, the eurozone鈥檚 biggest economy. The seven-day case rate has doubled in just 12 days; 48% of the population has been fully vaccinated but the pace of vaccination has slowed.
Economists say the fact that more people are now vaccinated may blunt the economic impact of the Delta variant. But it could slow the recovery if it leads to unexpected new restrictions and makes consumers more cautious. The European Union's executive commission forecasts growth of 4.8% this year after a plunge of 6.5% last year during the worst of the lockdowns.
French Prime Minister Jean Castex said Wednesday that his country was facing a 鈥渇ourth wave鈥� of the pandemic with cases rising sharply among unvaccinated people.
David McHugh, The Associated Press
