Assumptions of underlying forecasts are still correct
Forecasts were based on lockdown measures until end of Q1
Some of the uncertainty has been cleared, such as Brexit, US election, vaccine
Start of the year is more positive than some would argue
We are monitoring exchange rate movements very carefully, but we do not target it
ECB will be 'extremely attentive' to exchange rate impact on prices
Reuters reports that ECB policymaker Francois Villeroy de Galhau said that the amount of monetary stimulus is not the only question facing the European Central Bank and it also needs to look at how it is transmitted to the economy.
"In the face of prolonged uncertainty, out first objective must be keeping very favourable financing conditions as long as necessary," Villeroy said.
"To this end, the recalibration of instruments must focus in particular not only on the level of monetary support, but also on the duration, flexibility and efficient targeting, in short, the quality of monetary policy transmission," he added.
Reuters reports that ECB President Christine Lagarde said that the European Central Bank could "neither go bankrupt nor run out of money" even if it were to suffer losses on the multi-trillion-euro pile of bonds it has bought under its stimulus programmes.
"As the sole issuer of euro-denominated central bank money, the Eurosystem will always be able to generate additional liquidity as needed," Lagarde said.
"So, by the definition, it will neither go bankrupt nor run out of money. In addition to that, any financial losses, should they occur, would not impair our ability to seek and maintain price stability.
Reuters reports that European Central Bank policymaker Pablo Hernandez de Cos said that it will take time before any COVID-19 vaccine has a positive impact on the economy.
New restrictions imposed in euro zone countries to curb the second wave of the pandemic mean that the ECB's upcoming macroeconomic projections in December would be most likely revised downwards, de Cos added.
"The vaccine is very positive news, regarding investor confidence, consumers confidence and economic activity. But I would like to be cautious. In the short term, restrictions will continue across Europe," de Cos said.
The good news on the vaccine "will take time to translate into economic activity," he added.
Reuters reports that the size of the European Central Bank’s bond purchases will depend on the inflation outlook, the ECB’s chief economist Philip Lane said on Tuesday, warning once again about “highly uncertain” economic prospects for the euro zone.
“The overall envelope of PEPP (Pandemic Emergency Purchase Programme) purchases is a core determinant of the ECB’s overall monetary stance,” Lane said in a blog post.
“In line with the ECB’s price stability mandate, the inflation outlook plays the central role in determining the appropriate monetary stance.”
We should envisage support continuing beyond 2020
We really have to maintain attractive conditions until the middle of next year at least
Economic recovery will be sequential
The recovery will be a complicated matter, there is a lot of uncertainty
Savings grew substantially over the past two months
It will take a while before that translates back into investments, spending
Central banks have responded to the crisis in a 'massive' way
This crisis is worse than the 2008-09 financial crisis
The ECB mandate is the same i.e. focus on price stability
We have to use instruments that provide the most proportionate response
Needed to ensure that there was sufficient liquidity
Also needed to make sure that banks could continue lending to the economy
For once, monetary policy and fiscal policy worked hand in hand
Reuters reports that the European Central Bank's top supervisor urged banks on Friday to eat into their capital buffers and continue lending during the coronavirus crisis, insisting the ECB would be slow in raising requirements again.
"I hear sometimes that banks might not be willing to use the buffers because of concerns that the ECB would... ask for a fast replenishment of the buffers," Andrea Enria told a virtual meeting of bankers.
"I want to reassure all parties that we will strive to put in place a well-designed and credible path to normality," he added.
Reuters reports that European Central Bank Governing Council member Ignazio Visco said on Friday policy makers had to act to head off deflationary risks brought about by the sudden halt to economic activity during the coronavirus crisis.
Visco, who is also governor of the Bank of Italy, said disinflationary pressures could be strong and persistent, threatening economies where already high levels of public debt are growing massively during the crisis.
Presenting the Bank of Italy's annual report, he said the ECB was ready to use all the instruments available to ensure that all sectors of the economy could benefit from accommodative financing conditions.
"Steps must be taken to counter the significant risk of low inflation and the marked fall in economic activity from translating into a permanent reduction in expected inflation or into the possible resurfacing of the threat of deflation," he said.
"Also as a result of the high levels of public and private debt in the euro area as a whole, this could trigger a dangerous spiral between the fall in prices and that in aggregate demand."
CNBC reports that the vice president of the European Central Bank (ECB) has backed the unprecedented stimulus packages launched in the region, saying there were no alternatives for lawmakers.
Governments from euro area countries have passed major stimulus efforts in a bid to soften the impact of the coronavirus crisis and keep people in work. Fiscal deficits are expected to widen, debt piles will climb and the financial repercussions could be felt for generations.
However, Luis de Guindos, the vice president of the euro zone’s central bank, said the issue of lofty debt levels needs to be put into perceptive.
“At the end of the pandemic for sure that we will have higher public debt ratio. But the alternative of doing nothing is much worse,” he told CNBC’s Annette Weisbach when asked specifically about Italy.
“It would be much worse in terms of the crisis. And it would be much worse in terms of the recovery phase,” he added.
The ECB vice chief said that concerns over public finances in the medium term will have to be addressed. But for now, he called for “powerful and strong” fiscal responses at both the national and pan-European level.
It is very hard to forecast how badly the economy has been affected
Economic contraction now seen somewhere between 'medium' and 'severe' scenario
ECB had to resort to exceptional measures to make sure there is plenty of liquidity
ECB primary objective is to ensure price stability
Reuters reports that the coronavirus-hit euro zone economy probably will not return to its pre-pandemic levels until next year at the earliest, the European Central Bank's chief economist told El Pais newspaper, adding that the ECB was prepared to tweak its tools if needed.
"From today's perspective, it looks in any case unlikely that economic activity will return to its pre-crisis level before 2021, if not later," Philip Lane said in the interview published on the ECB's website.
Lane said the ECB was constantly monitoring the situation and was ready to adjust all of its instruments if that proved necessary. He added that the ECB's Pandemic Emergency Purchase Programme, also known as PEPP, could be adjusted.
He said the ECB was analysing the situation ahead of the upcoming June meeting, adding: "If we see that financial conditions are too tight, or the pressure on individual bond markets is not reflecting economic fundamentals, we can adjust the size or duration of our purchases, which we can anyway allocate flexibly over time and market segments."
The euro area is facing an economic contraction of a magnitude and speed that are unprecedented in peacetime.
Measures to contain the spread of the coronavirus (COVID-19) have largely halted economic activity in all the countries of the euro area and across the globe.
Euro area GDP could fall by between 5% and 12% this year, depending crucially on the duration of the containment measures and the success of policies to mitigate the economic consequences for businesses and workers.
As the containment measures are gradually lifted, these scenarios foresee a recovery in economic activity, although its speed and scale remain highly uncertain.
The variability depends on the duration of lockdown measures, success of policies
Headline inflation is likely to decline further in the coming months
An ample degree of monetary accommodation is necessary for the robust convergence of inflation to levels that are below, but close to, 2% over the medium-term
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