ECB will buy bonds at a faster pace to keep the recovery on track

The central bank said in a statement on Thursday that over the next three months it expects asset purchases under its €1.85 trillion ($2.2 trillion) pandemic stimulus program "to be conducted at a significantly higher pace than during the first months of this year."

The size of the program can also be "recalibrated if required" to maintain favorable financing conditions that help "counter the negative pandemic shock to the path of inflation," it added.

The move immediately sent yields on Germany's benchmark 10-year bond lower. It was last trading with a yield of minus 0.36%, down 0.04 percentage points from earlier in the day. The yield on Italy's 10-year bond also dropped.

Bond yields have ticked higher on concerns that prices will spike once economies reopen, prompting central bankers to reassure markets that they intend to keep interest rates low and leave stimulus measures in place. Policymakers fear that a sudden rise in rates could stifle activity and spell trouble for governments that have borrowed eye-popping amounts to rescue their economies.

The ECB said it expects interest rates to remain at current "or lower levels" until the inflation outlook improves to around 2%.

ECB President Christine Lagarde is also holding a press conference on Thursday, a performance that will be closely watched by investors.

"The main focus will ... be on how President Lagarde explains the new policy of increased asset purchases," said Andrew Kenningham, chief Europe economist at Capital Economics.

Europe's economy is mired in a double-dip recession, with GDP expected to contract in the first quarter following months of lockdowns across large parts of the region. A sluggish vaccine rollout will also weigh on its recovery.

—This is a developing story and will be updated.