PARIS: The European Central Bank’s chief economist Philip Lane has told fellow policymakers that the Ukraine conflict may reduce the euro zone’s economic output by 0.3%-0.4% this year, four people close to the matter told Reuters.
This was the “middle scenario” presented by Lane at a Governing Council meeting in Paris on Thursday, hours after Russia invaded Ukraine and as the ECB is grappling with how the crisis may affect its plans to withdraw monetary stimulus measures.
Lane also presented a severe scenario where GDP is reduced by close to 1% and a mild scenario where events in Ukraine had no impact on the 19-country currency bloc, which the sources said was now considered unlikely.
One source described the estimates as “back-of-the-envelope” calculations, another said they were “very preliminary” and a third said they were mostly derived from commodities prices.
All sources said Lane would bring more refined forecasts to the ECB’s March 10 policy meeting, at which it is expected to decide the future of its long-established Asset Purchase Programme (APP). It has already said it will stop making new bond purchases under a pandemic emergency scheme after March.
Lane did not present new inflation forecasts but he did tell Thursday’s meeting there would be a significant increase in the 2022 projection, while hinting that estimates at the end of the horizon could still be below the ECB’s 2% target.
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