European Central Bank head Christine Lagarde says the current 1.35 trillion-euro ($1.58 trillion) bond purchase program and cheap loans to banks are “likely to remain the main tools” to help the economy as it prepares to offer more stimulus in December.
Lagarde said Wednesday that “while all options are on the table,” the bond purchase program and offers of long-term credit to banks - in some cases carrying a negative interest rate that pays the banks to borrow - had proven effective and could be adjusted as the pandemic evolves.
At the central bank's last meeting on Oct. 28 Lagarde said there was “little doubt” that the monetary authority for the 19 countries that use the euro would step up its stimulus efforts at its Dec. 10 meeting. Analysts have been predicting more stimulus as a renewed increase in virus infections and partial lockdowns weigh on economic growth. Inflation, meanwhile, was at minus 0.3% in September and continues to lag the ECB's goal of below but close to 2%.
Lagarde warned Wednesday in her speech to an ECB online conference that the economy faces a “bumpy,” “stop-and-start” recovery despite good news about potential vaccines. She warned that lasting changes in behavior could drag out the rebound, and that governments and central banks will need policies that bridge the gap until vaccination is widespread.