Weekly Market Update (14 June 2021) – No fireworks from the ECB

(1) The Bank of Canada (BoC) held its monetary policy unchanged last Wednesday. The central bank highlighted that the recent lockdown in parts of Canada has impacted economic activities. Nonetheless, the BoC expects the Canadian economy to rebound strongly with the ongoing speedy vaccinations and the possible easing of restrictions over the summer.

(2) The European Central Bank (ECB) followed suit, holding its monetary policy unchanged as well during their meeting last Thursday. During the press conference, ECB President Lagarde mentioned that no discussions were made on exiting the PEPP as it is still premature to do so. Nonetheless, the central bank has revised its GDP projection upwards from 4% to 4.6% in 2021 and 4.1% to 4.7% in 2022. Inflation projection has also been revised upwards from 1.5% to 1.9% in 2021 and 1.2% to 1.5% in 2022.

(3) The U.S. Bureau of Labor Statistics reported that headline inflation in May rose to the fastest pace since August 2008 with a 5% increase year over year in May. Core inflation, which excludes food and energy prices, rose by 3.8%, the highest increase in close to three decades. The main driver behind the strong inflation figures is the rise in used cars and truck prices.