Capstone:The European Central Bank is more worried about the economy than expected, suggesting more stimulus measures may be introduced this year!

 

2020-10-12 18:52      from:Capstone    author:Thomas

Capstone:According to the September meeting minutes released on Thursday, the European Central Bank's concerns about the economy hit by the epidemic may exceed analysts' expectations, suggesting more stimulus measures may be introduced later this year.



Central bank policy makers advocate "letting go" to fight the economic damage caused by the coronavirus pandemic. They worry that a series of risks, from the strong euro and high infection rate to the US election, will put pressure on economic growth and consumer prices.

This is in sharp contrast to the moderate attitude towards economic growth held by European Central Bank President Christine Lagarde at a news conference after the meeting. Lagarde raised some of her economic forecasts, downplaying concerns about the strength of the euro.

"Given the rising uncertainty, there is reason for us to 'let go' policy. We need to carefully assess all available information, including the euro exchange rate, and maintain the flexibility to take appropriate policy actions when necessary." According to the minutes of the ECB's September 9-10 meeting.

Economists said the minutes showed a different picture from what Ms. Lagarde described at the press conference and could be seen as correcting the ECB's message, especially when uncertainty and exchange rates were mentioned more than 20 times.

Carsten Brzeski, an economist at Dutch international group, said, "the minutes of the September meeting showed that the ECB was actually more worried about inflation and the euro than market participants expected after the press conference."

Indeed, policymakers have listed a long list of risks, including brexit, US elections, politically troubled financial support, and a stronger euro against the dollar, which will put pressure on inflation.

Although some questioned the ECB's commitment after Lagarde's press conference, the record supports expectations that the ECB will increase bond purchases either by expanding its 1.35 trillion Euro large-scale emergency purchase program (PEPP) or through the public sector purchase program (PSPP).

However, action could be delayed until December, as policymakers also stressed the need for more information before making a sensible stimulus decision.

"Uncertainty is the key word It has been mentioned 23 times. " "In the past, the central bank has used this wording to indicate that it is planning further stimulus measures, and we hope it will do the same this time," said Jan von gerich, an economist at nordea



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