ECB Expects “Very Negative” Data in November, Pledges to Recalibrate Measures to Downturn

Central banks news

ECB has announced to leave all its monetary policy measures unchanged. The deposit rate stays at -0.5%, while the main refi rate and the marginal lending rate also remain unchanged at 0% and 0.25% respectively. The PEPP program will continue to run with a total envelope of 1.35 trillion euro. The members were concerned about the economic outlook and signaled that more stimulus measures will come out in December.

President Christine Lagarde raised concerns about the negative impacts of renewed lockdown measures by Germany and France (and many more to come) on economic recovery. At the press conference, Lagarde suggested that resurgent coronavirus cases and restrictive measures have led to a “clear deterioration” in the region’s economic outlook in the near-term. While acknowledging stronger-than-expected data in 3Q20, she noted that November’s data will be “very negative” and 4Q20’s data will miss projections. Yet, she added that it’s too early to conclude that the economy will contract in 4Q20.

While keeping the powder dry this month, ECB indicated that more will be done in coming months. The president pledged that committee will be “looking at everything”. It will “carefully assess the incoming information, including the dynamics of the pandemic, prospects for a rollout of vaccines and developments in the exchange rate”. Lagarde added that “on the basis of this updated assessment, the Governing Council will recalibrate its instruments, as appropriate, to respond to the unfolding situation”. Since the will be updates in the latest economic projections in December. We believe it is the time for the central bank to announce a new package of stimulating measures.

– advertisement –