Capstone:European Central Bank Lagarde held a press conference, saying that the European Central Bank has discussed the issue of Euro appreciation!


2020-09-11 15:12      from:Capstone    author:Jeff

Capstone:European Central Bank President Christine Lagarde held a news conference at 8:30 p.m. Beijing time on Thursday. She believed that the uncertainty depressed consumer spending and enterprise investment, and the strength of recovery was still affected by uncertainty. As for the recovery after the third quarter, it would largely depend on the development of the epidemic. In terms of policy, it is similar to the previous one, which is mainly repeated policy statements.

As of press time, Lagarde mainly talked about the following points in her speech:

1. Financial economy. MS Lagarde said uncertainty was weighing on consumer spending and corporate investment, while the strength of the recovery was still affected by uncertainty, which also led to significant economic slack. She also stressed that data and surveys will show a strong rebound in GDP in the third quarter, and that further sustained recovery is highly dependent on the development of the new epidemic. During the meeting, the European Central Bank raised the euro zone's GDP forecast for this year to - 8%, but slightly lowered its GDP forecast for the next two years.

2. Inflation. Lagarde said overall inflation will remain negative in the coming months, while the European Central Bank will carefully assess the impact of the euro on inflation. Inflation expectations based on the market remain moderate, but the long-term inflation outlook is bleak. In the medium term, demand recovery will bring upward pressure on inflation. In addition, the European Central Bank lowered its full year inflation forecast for 2021 to 0.8% from 1% previously, and inflation will turn positive at the beginning of 2021. In addition, Lagarde also mentioned that the euro will exert downward pressure on inflation.

3. Euro exchange rate. Lagarde said the European Central Bank discussed the appreciation of the euro, but did not target the exchange rate. In addition, the need to monitor exchange rates carefully has been widely discussed.

In addition to the impact of monetary policy, the recent strength of the euro is indeed one of the problems that the European Central Bank is quite worried about. Some analysts believe that European Central Bank policy makers have expressed concern about the euro exchange rate surge, believing that the euro exchange rate surge will undermine the initial economic recovery, and may have further downward pressure on inflation. Given that interest rates are likely to remain unchanged, the ECB can at least continue its verbal intervention to curb the rapid appreciation of the euro and ease market concerns.

For example, in a report, the Bank of France and Pakistan said that it expected the European Central Bank to have few effective options to deal with the appreciation of the euro, and its verbal response on the exchange rate issue might continue. At the same time, the tone on economic issues will be more balanced and generally more cautious. On the whole, the goal of ECB president Lagarde will be to lower the euro by hinting more policy action without making advance commitments.

However, for the next European economy, the central bank is relatively optimistic. Euro zone officials familiar with the discussions said some ECB policymakers had become more confident about the economic recovery expectations, which could reduce the need for more monetary stimulus measures by the ECB during the year.

The people concerned said that the European Central Bank will raise its GDP forecast for this year as the performance of private consumption is far better than expected, but the latest expectation on output and inflation will only slightly adjust compared with the expectation in June. Officials familiar with the situation also said that, given the current situation, providing monetary support in addition to bond purchase projects does not seem necessary, and the economic expectation, which will be further updated in December, will be an important factor in considering the next step.

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