The recovery of the euro zone from the deep recession could be derailed in the event of a large second wave of the novel coronavirus pandemic which makes it more important to announce ultra-easy monetary policy, said Fabio Panetta, a board member of the European Central Bank in an interview to a Greek newspaper.
The economy of the euro zone is expected by the ECB to return back to pre-pandemic levels by the end of 2022. However, that projection was now facing a risk, Panetta said. This comment is therefore likely to give more fuel to expectation of an expansion of its stimulus efforts in December by the ECB.
“The return to more stringent containment measures that we are observing in a number of euro area countries may push this horizon even further away,” Saturday’s daily Kathimerini quoted Panetta as saying.
“This reinforces the need for prolonged economic support from macroeconomic policies.”
There is no immediate pressure on the ECB to act quickly because it has already agreed to make a purchase of debt of up to 1.35 trillion euros through mid-2021 under an emergency purchase scheme.
However a commitment to bigger and longer debt buys is still being expected by investors.
“In view of the sheer size of the downside risks, there should not be any doubt about our determination to preserve price stability,” Panetta added.
There was a risk of exacerbating the recent discrepancy between the weaker and stronger economies of the 19-country single currency zone because of the slowness of the recovery which in turn would widen the inequality, he said.
The next meeting of the ECB is scheduled for October 29. However any new decision on policy changes or otherwise is expected to be taken up by the ECB at its next meeting scheduled for December 10 where it is expected that the central bank would unveil a set of new economic projections for the zone.
(Adapted from Investing.com)