You are here: Home » International » News » Economy
Business Standard

ECB eyes more bond buys, cheap loans to keep euro zone afloat: Lagarde

Lagarde said inflation in the 19-country bloc was now likely to remain negative for longer than expected as a second wave of the COVID-19 outbreak forces new restrictions on economic activity.

European Central Bank | Christine Lagarde | Europe economy


Christine Lagarde
ECB President Christine Lagarde

The will focus on more emergency bond purchases and cheap loans for banks when it puts together its new stimulus package next month to help the pandemic-hit euro zone economy, ECB President said on Wednesday.

Lagarde said inflation in the 19-country bloc was now likely to remain negative for longer than expected as a second wave of the Covid-19 outbreak forces new restrictions on economic activity.

The ECB’s job was to keep borrowing costs sufficiently low for households, firms and governments and support the banking sector to prevent a credit crunch, she said, pointing to the bank’s Pandemic Emergency Purchase Programme and Targeted Longer-Term Refinancing Operations as its instruments of choice.

“While all options are on the table, the PEPP and TLTROs have proven their effectiveness in the current environment and can be dynamically adjusted to react to how the pandemic evolves,” Lagarde said.

“They are therefore likely to remain the main tools for adjusting our monetary policy.”

Her comments confirmed what sources had told Reuters after the ECB’s Oct. 10 policy meeting and last week.

In a hint the ECB could extend both policies significantly, Lagarde emphasised “the duration of policy support” to ensure all parts of the would count on financing conditions remaining “exceptionally favourable”.

The ECB president poured cold water on rising investor optimism about a new vaccine after U.S. drugmaker Pfizer Inc said on Monday its experimental Covid-19 vaccine was more than 90% effective based on initial trial results.

“While the latest news on a vaccine looks encouraging, we could still face recurring cycles of accelerating viral spread and tightening restrictions until widespread immunity is achieved,” she added.

Lagarde was kicking off the ECB’s annual symposium -- held virtually this year due to the pandemic -- at which the world’s top central bankers were due to discuss why monetary policy is not working as it used to and what role they might play in a changed world.

Dear Reader,

Business Standard has always strived hard to provide up-to-date information and commentary on developments that are of interest to you and have wider political and economic implications for the country and the world. Your encouragement and constant feedback on how to improve our offering have only made our resolve and commitment to these ideals stronger. Even during these difficult times arising out of Covid-19, we continue to remain committed to keeping you informed and updated with credible news, authoritative views and incisive commentary on topical issues of relevance.
We, however, have a request.

As we battle the economic impact of the pandemic, we need your support even more, so that we can continue to offer you more quality content. Our subscription model has seen an encouraging response from many of you, who have subscribed to our online content. More subscription to our online content can only help us achieve the goals of offering you even better and more relevant content. We believe in free, fair and credible journalism. Your support through more subscriptions can help us practise the journalism to which we are committed.

Support quality journalism and subscribe to Business Standard.

Digital Editor

First Published: Wed, November 11 2020. 19:51 IST