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DPA
Berlin
European Central Bank (ECB) President Christine Lagarde is expected to signal next week the ECB’s readiness to act again to contain the economic fallout from the coronavirus crisis with parts of the eurozone already on red alert as new cases surge. The Frankfurt-based bank’s 25-member governing council meeting next week is not expected to make any changes to its current monetary policy.
As a result, analysts see the ECB leaving interest rates at historic lows and maintaining its emergency pandemic bond-buying programme at 1.35 trillion euros (1.6 trillion dollars). The programme is currently due to end in June 2021. But Lagarde told the French daily Le Monde this week: “Since the rebound we saw over the summer, the recovery has been uneven, uncertain and incomplete and now risks losing momentum. The options in our toolbox have not been exhausted. If more has to be done, we will do more.”
Minutes of the last month’s council meeting also underscored the bank’s concern about the deepening sense of uncertainty unleashed by the global pandemic, which has now dominated much of Lagarde’s first year in the job as ECB chief.
The ECB was aiming at “keeping a free hand in view of the elevated uncertainty... and to maintain flexibility in taking appropriate policy action if and when needed,” according to the September meeting minutes released last week. “Christine Lagarde could take the lead [next week] and pave the way for fresh stimulus in December,” said ING Bank chief macro economist Carsten Brzeski, who noted that the word uncertainty appeared more than 20 times in the meeting’s minutes.
Lagarde is also set to unveil the ECB’s new inflation and growth forecasts following the bank’s December meeting, with the projections often forming the basis of bank’s decision making.
In the meantime, a steady stream of data has backed up Lagarde’s concerns that the 19-member eurozone economy has lost momentum in recent months after it bounced back from a deep trough earlier this year triggered by the pandemic.
While industrial production in the currency bloc slowed to just 0.7 per cent in August from 5 per cent in July, consumer confidence in the region slumped in October amid unemployment fears, a key survey released by the European Commission on Thursday showed.
At the same time, official figures also show the virus raging across the eurozone forcing governments to ramp up measures on economic and public life in a bid to curb the spread of the potentially deadly virus.
Even more alarming for the ECB is that annual inflation - its key monetary policy measure - fell deeper into negative territory last month, slipping to minus 0.3 per cent from minus 0.2 per cent in August as the pandemic took its toll on economic activity.
Consumer prices have now undershot the ECB’s annual inflation target of just below 2 per cent for the last seven years. In the meantime, Ireland’s decision to implement a six-week lockdown of parts of the nation’s economy could herald similar tough action across other parts of the eurozone.
Berlin
European Central Bank (ECB) President Christine Lagarde is expected to signal next week the ECB’s readiness to act again to contain the economic fallout from the coronavirus crisis with parts of the eurozone already on red alert as new cases surge. The Frankfurt-based bank’s 25-member governing council meeting next week is not expected to make any changes to its current monetary policy.
As a result, analysts see the ECB leaving interest rates at historic lows and maintaining its emergency pandemic bond-buying programme at 1.35 trillion euros (1.6 trillion dollars). The programme is currently due to end in June 2021. But Lagarde told the French daily Le Monde this week: “Since the rebound we saw over the summer, the recovery has been uneven, uncertain and incomplete and now risks losing momentum. The options in our toolbox have not been exhausted. If more has to be done, we will do more.”
Minutes of the last month’s council meeting also underscored the bank’s concern about the deepening sense of uncertainty unleashed by the global pandemic, which has now dominated much of Lagarde’s first year in the job as ECB chief.
The ECB was aiming at “keeping a free hand in view of the elevated uncertainty... and to maintain flexibility in taking appropriate policy action if and when needed,” according to the September meeting minutes released last week. “Christine Lagarde could take the lead [next week] and pave the way for fresh stimulus in December,” said ING Bank chief macro economist Carsten Brzeski, who noted that the word uncertainty appeared more than 20 times in the meeting’s minutes.
Lagarde is also set to unveil the ECB’s new inflation and growth forecasts following the bank’s December meeting, with the projections often forming the basis of bank’s decision making.
In the meantime, a steady stream of data has backed up Lagarde’s concerns that the 19-member eurozone economy has lost momentum in recent months after it bounced back from a deep trough earlier this year triggered by the pandemic.
While industrial production in the currency bloc slowed to just 0.7 per cent in August from 5 per cent in July, consumer confidence in the region slumped in October amid unemployment fears, a key survey released by the European Commission on Thursday showed.
At the same time, official figures also show the virus raging across the eurozone forcing governments to ramp up measures on economic and public life in a bid to curb the spread of the potentially deadly virus.
Even more alarming for the ECB is that annual inflation - its key monetary policy measure - fell deeper into negative territory last month, slipping to minus 0.3 per cent from minus 0.2 per cent in August as the pandemic took its toll on economic activity.
Consumer prices have now undershot the ECB’s annual inflation target of just below 2 per cent for the last seven years. In the meantime, Ireland’s decision to implement a six-week lockdown of parts of the nation’s economy could herald similar tough action across other parts of the eurozone.
