The European Central Bank kept eurozone interest rates unchanged on Thursday, but noted that it might be willing to supply more to the economy, as a momentary wave of the coronavirus pandemic forced the block of the region’s powers, such as Germany and France.
The ECB left rates unchanged at 0. 0%, as expected, and said its current asset acquisition programme would be EUR 1. 35 trillion.
In its statement, the ECB said that the dangers to the economy were “clearly down-targeted” and that bank staff would re-think about their economic outlook at this level and whether additional action was needed.
ECB President Christine Lagarde said at a news convention following the resolution that the dynamics of the eurozone economy were deteriorating faster than expected and that the central bank would hesitate to act.
“The cases will justify the recalibration and implementation of this recalibrated package,” he said.
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The bank said it expected headline inflation to remain negative until early 2021, due to weak demand, although it expects customer costs to rise most likely in the medium term, once the COVID-19 effect has diminished.
“We’re going to stand still. We will use all the tools we have with all the flexibility we have, and obviously I am referring here to PEPP more than others, to deal with the situation,” Lagarde said, referring to the ECB’s $75 billion pandemic emergency procurement plan.
“We have done this in the past, we have responded very quickly, very appropriately, very strongly, some would say, to the first wave that hit the eurozone economies. We did it for the first wave and we’ll do it again. for the moment, wave. But don’t assume it’s going to be just one instrument. Let’s take a look at them all, ” he said.
The euro fell overall after Lagarde’s comments, spending 0. 6% against the dollar, 0. 5% against the yen, 0. 2% against the pound and 0. 9% against the offshore yuan.
Yields on the two-year German interest-sensitive Bund fell by 2 basic issues to a minimum of five and a half months of -0. 814%.
Spain declared this week a state of emergency that is expected to last several months and has aimed to close closures across the country, while Italy is forcing bars and restaurants to close early and has also limited other activities.
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