European Central Bank (ECB) Governor Christine Lagarde said the eurozone economy probably shrank in October-December 2020 (fourth quarter). It means that the euro area is heading to the bottom of the recession.
“The contraction in the fourth quarter will flow into the first quarter,” he said. As the government tightens restrictions on travel, entertainment, and non-essential store operations in the fight against the new coronavirus, which contains new mutants, expectations for negative growth in January-March (first quarter) are increasing. ing.
Lagarde said in a virtual press conference after the decision, deeper discussions are expected to take place in March, when the latest economic forecasts are ready and the crisis unfolds more clearly.
ECB maintains status quo-even with prolonged restrictions on new corona measures
ECB Crisis Response
The central bank’s main tools to fight the virus fallout
Source: ECB
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“The risks surrounding the growth outlook for the euro area are still down, but not as pronounced as they used to be,” he said, adding that the start of vaccination in December last year would increase confidence in resolving the new corona crisis.
It listed positive factors such as the start of vaccination, the approval of the European Union (EU) reconstruction fund, the recovery of manufacturing, and the elimination of political uncertainty in the United States.
He acknowledged that the 3.9% eurozone economic growth outlook announced six weeks ago was “generally valid.” Growth rates for the fourth quarter of last year will be announced around the end of this month.
The Governor reiterated that the PEPP purchase quota “does not have to be used in full” as long as the financial environment can be maintained at current levels. Most economists who responded to Bloomberg’s survey expect that the full amount will eventually be spent. It is not expected that re-expansion of purchase quotas will be necessary.
Just Enough
Most economists see ECB spending full amount on emergency bond buying
Source: Bloomberg survey of economists conducted Jan. 8-13
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Policy committee members did not discuss exchange rates, a person familiar with the matter said on condition of anonymity. The Governor said he was “very carefully” watching over the strength of the euro.
Rather, officials discussed longer-term policy options, including the possibility of combining PEPP with traditional bond-purchasing programs and yield curve control, according to people familiar with the matter.
This part of the meeting was discussed as part of an extensive strategic review, including inflation targets and response to climate change, officials said. An ECB spokesman declined to comment.
The Governor said that monetary policy support would continue as long as necessary, and emphasized that government spending should continue.
However, he called for “as targeted and short-term as possible,” and said, “We are all hoping for a recovery in 2021. Probably in the second half of the year.”
Original title:Lagarde Signals New Recession Even as ECB Holds Stimulus Steady、Lagarde Says Euro-Zone Economy Shrank at End of Last Year (1)(Excerpt)
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