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ECB's Lagarde urges 'no complacency' in virus fightback

  • Eurozone inflation turned negative in August for the first time in four years at -0.2. percent.
Published September 13, 2020
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FRANKFURT AM MAIN: European Central Bank president Christine Lagarde said Sunday there could "no complacency" in the battle to recover from the pandemic-induced downturn, urging governments to support central bank efforts with fiscal spending.

Although the eurozone was bouncing back from the lockdowns that devastated economic activity earlier this year, Lagarde said the recovery remained "uneven" and "uncertain" as several nations grapple with a renewed rise in coronavirus infections.

The ECB "continues to stand ready to adjust all of its instruments" to help steer the 19-nation currency club through the crisis, Lagarde said in an online speech addressing a meeting of Arab central bankers.

But she reiterated that eurozone governments had to share the load through public spending and investment.

"Continued expansionary fiscal policies are vital to avoid excessive job shedding and support household incomes until the economic recovery is more robust," former International Monetary Fund chief Lagarde said.

She urged governments to quickly thrash out the remaining details on the European Union's 750-billion-euro coronavirus recovery fund "so that the funds can start flowing on schedule in January 2021".

The ECB itself has taken unprecedented action in recent months to cushion the blow from the pandemic fallout, rolling out a 1.35 trillion euro emergency bond-buying scheme while keeping interest rates at record lows and offering ultra-cheap loans to banks.

The aim is to keep borrowing costs low to boost the economy and push up inflation.

But the ECB's efforts have been complicated in recent weeks by the rapid rise of the euro against the dollar.

A stronger euro makes imports cheaper, keeping the lid on consumer prices, while exports become less competitive, hurting growth prospects.

Eurozone inflation even turned negative in August for the first time in four years at -0.2. percent -- far off the ECB's inflation target of just under 2.0 percent.

Lagarde acknowledged the concerns, saying that "near-term price pressures will also remain subdued due to the recent appreciation of the euro exchange rate".

"When it comes to meeting our price stability goal, there is and there will be no complacency," Lagarde vowed.

The comments were stronger than on Thursday when, after the ECB's regular monetary policy meeting, Lagarde said the Frankfurt institution was "carefully" monitoring the soaring euro.

Many analysts expect the ECB to unleash more monetary stimulus before the year is over, possibly by extending or increasing its massive emergency bond-buying scheme.


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