The risk that the second wave of the coronavirus pandemic will derail the euro zone’s recovery from a deep recession makes an ultra-easy monetary policy all the more necessary, Fabio Panetta, member of the board of directors of the European Central Bank (photo) told a Greek newspaper, writes Balazs Koranyi.
The ECB expects the bloc’s economy to return to its pre-crisis level by the end of 2022 – but Panetta said that projection is now in jeopardy, a comment that may reinforce expectations that the ECB would step up its stimulus efforts in December.
“The return to stricter containment measures that we are observing in a number of euro area countries could push this horizon even further”, the daily newspaper on Saturday Kathimerini quoted Panetta as saying.
“This reinforces the need for sustained economic support for macroeconomic policies.”
Having already agreed to buy up to € 1.35 trillion in debt by mid-2021 as part of an emergency purchase program, the ECB is not under pressure to act quickly – but investors are still looking for a commitment for larger and longer debt purchases.
“Given the magnitude of the downside risks, there should be no doubt about our determination to preserve price stability,” added Panetta.
He said the slow recovery risked exacerbating the recent divergence between the weaker and stronger members of the 19-country single currency area, and thus widening inequalities.
The ECB will then meet on October 29, but political action is more likely at the next meeting on December 10, where new economic projections are due to be released.