ECB's Lagarde pushes back on gloomy forecasts, sticks to recovery
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[January 13, 2021] By
Alessandra Galloni
FRANKFURT (Reuters) - European Central Bank
President Christine Lagarde pushed back on Wednesday against economic
pessimism, arguing that a rebound will come as pandemic uncertainty
declines and that Europe possesses all the tools needed to overcome the
crisis.
Even with much of the 19-member euro area in lockdown, Lagarde continued
to predict a recovery, provided that economic restrictions can be lifted
from the second quarter and the bloc can overcome a "laborious" start to
vaccinations.
Only last month, the ECB cut its growth forecast to 3.9% this year but
increasingly widespread curbs on movement and activity in countries
including Germany and France, along with the slow rollout of vaccines,
are already challenging that outlook, just two weeks into 2021.
"I think our last projections in December are still very clearly
plausible," Lagarde said in an interview at the Reuters Next conference.
"Our forecast is predicated on lockdown measures until the end of the
first quarter."
The ECB said on Dec. 10 that its forecasts assumed "sufficient" levels
of herd immunity would be reached before the end of 2021.
"What would be a concern would be that after the end of March those
member states still need to have lockdown measures and if, for instance,
vaccination programmes were slowed down," she added.
"VERY ATTENTIVE"
The euro's persistent rise against the dollar also risks dampening
growth and inflation but Lagarde maintained the ECB's cautious tone,
despite big moves around the turn of the year.
"We are very attentive, we will continue to being extremely attentive to
the impact on prices that the exchange rates have," she said, adding
that the ECB does not target any particular exchange rate level.
[to top of second column] |
New European Central Bank (ECB) President Christine Lagarde
addresses a news conference on the outcome of the meeting of the
Governing Council, in Frankfurt, Germany, December 12, 2019.
REUTERS/Ralph Orlowski/File Photo
Private sector economists are already cutting their growth projections, with
Bank of America now predicting a 2.9% expansion - a full percentage point below
its previous forecast.
To support the euro zone, the ECB has already extended ultra-easy policy into
2022, but with borrowing costs at record lows and well into negative territory
in some euro zone countries, its remaining stimulus firepower is limited.
Lagarde said the ECB could expand its bond-buying stimulus programme again if
needed, but might also refrain from using the entire 1.850 trillion euro ($2.25
trillion) envelope it has earmarked for purchases if the crisis passes.
"If the envelope that we have agreed upon is excessive and we don't need the
entire envelope, so be it," she said. "We will buy adequately in order to stick
to our goal of favourable financing conditions. If more is needed, we will
recalibrate."
Lagarde also pushed back on calls for the bank to publish its new inflation
target before its overarching policy review is fully completed, arguing that a
"very large" group within the Governing Council is keen for a single package.
The review's results are expected around mid-year.
For more coverage from the Reuters Next conference please click here or
www.reuters.com/business/reuters-next
To watch Reuters Next live, visit
https://www.reutersevents.com/events/
next/register.php
($1 = 0.8205 euros)
(Writing by Balazs Koranyi and Francesco Canepa; Editing by Catherine Evans)
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