The European Central Bank is fully committed to guiding the eurozone economy to recovery even with COVID-19 cases still rising, mainly through large bond purchases, claimed chief economist Philip Lane on Tuesday August 4.
The comments Lane made were likely to increase expectations within the market that the ECB could be set to increase its €1.35 trillion Pandemic Emergency Purchase Programme (PEPP) in September, during the period it updates its economic forecasts.
Lane also claimed that a full economic recovery will take plenty of time, as well as requiring a stimulus from the ECB and also from governments, in order to try and compensate for declining household incomes, and the significant increase in unemployment throughout the euro zone.
In a blog post, Lane claimed that “While there has been some rebound in economic activity, the level of economic slack remains extraordinarily high and the outlook remains uncertain”.
He added that the ECB “is committed to providing the monetary stimulus needed”.
This blog post broke the silence surrounding the ECB’s lack of clarification over policy matters, with the last comments made to the public being by ECB President Christine Lagarde during a press conference held on July 16.
Since Lagarde’s press conference, several surveys have hinted towards a potential recovery, after the euro zone suffered its worst ever fall during the second quarter of the year.
However, after the United States suffered from a surge in new COVID-19 cases during the second quarter, the euro has reached its highest level against the dollar since mid-2018, with the euro zone heavily relying on exports.
Lane claimed that any change in the PEPP scheme would depend heavily on the inflation outlook.
He stated that “The overall envelope of PEPP purchases is a core determinant of the ECB’s overall monetary stance”.
Lane added that such an inflation outlook “play the central role in determining the appropriate monetary stance”.