Vaccination pace finally picks up

After contracting again in the first quarter of this year, prospects for the second quarter have improved because the pace of vaccination has accelerated. At its recent pace, the euro-zone is on track to have vaccinated 70% of the adult population by July, a level it had previously aimed to achieve by September.  That should embolden governments to begin to lift restrictions in the coming weeks and this in turn should bring forward some of the pick-up in economic activity. We now think that GDP will increase by around 1% q/q in the second quarter. Meanwhile, despite a rise in headline inflation there is little sign that underlying inflationary pressure is building. We expect the ECB to keep to its current course and buy approximately €20bn of assets per week under its emergency programme (PEPP).