Frankfurt: The European Central Bank (ECB) is set to unleash more stimulus for the eurozone at its last meeting of the year on Thursday, as the region’s battered economy grapples with a second coronavirus wave.
ECB chief Christine Lagarde (pic below) in October all but promised that extra support was on the way, when she said the Frankfurt institution would “recalibrate” its instruments this month.
The ECB will also unveil fresh economic forecasts likely to have been revised downwards after a spike in virus cases forced renewed shutdowns across Europe, although the prospect of mass vaccinations from next year could brighten the longer-term outlook.
Analysts widely expect the ECB’s governing council to add another €500bil (US$600bil) to its €1.35 trillion pandemic emergency bond-buying programme (PEPP), and extend it beyond the current deadline of June 2021.
The purchases are aimed at keeping borrowing costs low to encourage spending and investment and bolster economic growth.
The ECB could also offer more ultra-cheap credit to banks for longer under a scheme known as TLTROs, whereby banks get loans at highly favourable interest rates in return for lending on to the wider economy.
The central bank is all but certain to keep interest rates at historic lows, but may increase its pre-pandemic asset purchases from the current €20bil a month.
At Thursday’s press conference, Lagarde is likely to reiterate pleas for governments to share the load through fiscal stimulus, as EU member states bicker over a €750bil recovery fund that has been blocked by Poland and Hungary.
The ECB will be “under pressure to do more while the European budgetary policy response is lagging behind, ” said Pictet Wealth Management strategist Frederik Ducrozet. — AFP