ECB president Christine Lagarde says COVID-19 recession is ‘highly unusual’ and cautions against excessive optimism over a vaccine

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Christine Lagarde, President of the European Central Bank, speaks to the media following a meeting of the ECB governing board Thomas Lohnes/Getty Images
  • COVID-19 has produced a highly unusual recession and recovery is likely to be uneven, even with the roll-out of a vaccine, the European Central Bank president, Christine Lagarde, told a meeting of central bankers.
  • Lagarde signalled the central bank will continue to support the eurozone economy and bond-buying is its preferred tool to do so.
  • “The recovery may not be linear, but rather unsteady, stop-start and contingent on the pace of vaccine roll-out,” she said.
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The COVID-19 crisis has produced a highly unusual recession and recovery is likely to be uneven, according to European Central Bank president, Christine Lagarde, who on Wednesday warned against excessive optimism over the short-term impact to the economy from a vaccine.

“While the latest news on a vaccine looks encouraging, we could still face recurring cycles of accelerating viral spread and tightening restrictions until widespread immunity is achieved,” Lagarde told the ECB forum on central banking in Frankfurt.

“The recovery may not be linear, but rather unsteady, stop-start and contingent on the pace of vaccine roll-out,” she said.

On Monday, US drugmaker Pfizer said a key trial of its COVID-19 vaccine had shown a high degree of success in preventing reinfection. Financial markets have soared and those assets that were hardest hit by the pandemic, such as airlines, brick-and-mortar retailers and energy companies, have posted double-digit percentage gains in some cases.

By Wednesday, the European Commission said it had reached a deal with Pfizer and its German partner, BioNTech, to buy up to 300 million doses of the vaccine, according to Reuters.


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Lagarde signalled at the last regular meeting of the central bank that the ECB will almost certainly loosen monetary policy next month, as the eurozone economy risks veering back towards recession. She reiterated that the ECB stood ready to take action to ward off further weakness.

“A continued, powerful and targeted policy response is vital to protect the economy, at least until the health emergency passes and vaccination is well advanced. The right policy mix is essential,” Lagarde said.

The ECB is keeping interest rates at 0.0% and has an asset purchase program in place worth 1.35 trillion euros ($US1.58 trillion). Bond-buying and pumping extra cash into the financial system are the best ways the central bank can help support the economy, Lagarde said, flagging the ECB’s Pandemic Emergency Purchase Programme and Targeted Longer-Term Refinancing Operations, in particular.

She added: “While all options are on the table, the PEPP and TLTROs have proven their effectiveness in the current environment and can be dynamically adjusted to react to how the pandemic evolves. They are therefore likely to remain the main tools for adjusting our monetary policy.”

Large swathes of the eurozone are back under lockdown, with partial or full national restrictions in place in major economies such as Germany, France, Ireland, Spain, and Italy.


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