The risk that the second wave of the coronavirus pandemic could derail the euro zone’s recovery from deep recession makes ultra-easy monetary policy all the more necessary, European Central Bank board member Fabio Panetta (pictured) has told a Greek newspaper, writes Balazs Koranyi.
The ECB expects the bloc’s economy to return to its pre-crisis level by the end of 2022 - but Panetta said this projection was now at risk, a comment likely to reinforce expectations that the ECB will expand its stimulus efforts in December.
“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.”
Having already agreed to buy up to €1.35 trillion of debt through mid-2021 under an emergency purchase scheme, the ECB is not under pressure to act quickly - but investors are still looking for a commitment to bigger and longer debt buys.
“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.
He said the slowness of the recovery risked exacerbating the recent divergence between the weaker and stronger members of the 19-country single currency zone, and so widening inequality.
The ECB next meets on 29 October, but policy action is more likely at the following meeting on 10 December, where new economic projections are due to be unveiled.