© Bloomberg. A laptop displays Christine Lagarde, President of the European Central Bank (ECB), during a live video of the central bank’s virtual press conference on the rate decision in Frankfurt, Germany, in this photograph hosted at London, UK, Thursday September 10th. , 2020. The European Central Bank has kept its emergency monetary stimulus unchanged as the region enters a critical phase of its recovery from the coronavirus crisis. Photographer: Hollie Adams / Bloomberg
(Bloomberg) – The European Central Bank stands ready to roll out more monetary stimulus to help the much-needed recovery as the pandemic dampens the outlook for the economy, according to President Christine Lagarde.
Speaking to EU lawmakers on Monday, Lagarde called the recovery in the 19-country eurozone uncertain and incomplete, with consumers wary of spending and businesses reluctant to invest.
“The public health crisis will continue to weigh on economic activity and pose downside risks to the economic outlook,” Lagarde said during a video conference with members of Parliament’s Committee on Economic and Monetary Affairs European. The Board of Directors “continues to stand ready to adjust all of its instruments as necessary.”
The resurgence of coronavirus infections threatens further restrictions, jeopardizing economic progress made since lockdowns earlier this year plunged the region into a deep recession.
Policymakers have started to define their positions ahead of a discussion on whether the ECB should add support to support the economy. Most economists predict that the 1.35 trillion euro ($ 1.6 trillion) emergency bond purchase program will be expanded this year – likely in December when new economic forecasts are released.
The ECB said earlier this month that the recovery was in line with its baseline projections. Yet some of the most recent surveys have shown that if the manufacturing sector continues to improve, services decline again.
One of the most worrying consequences for ECB officials – including recently Executive Board member Fabio Panetta and Bank of Spain Governor Pablo Hernandez de Cos – is falling inflation. The annual rate of consumer prices fell below zero in August for the first time in four years.
Lagarde said headline inflation in the euro area is expected to remain negative over the next few months – in part due to a stronger euro. Preliminary inflation data for September is due on Friday.
“The Governing Council will carefully assess all incoming information, including exchange rate developments, with regard to its implications for the medium-term inflation outlook,” Lagarde said.
© 2020 Bloomberg L.P.
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