Vexed central banks brace for more damage to growth


Like many of her counterparts, European Central Bank (ECB) president Christine Lagarde (pic) put a brave face on the outlook last week, insisting that forecasts released in December are still “plausible.”

FRANKFURT: Resurgent coronavirus outbreaks will vex central bankers on five continents this week as they weigh the threat of more damage to growth against the hope that mass vaccinations will reopen economies.

Institutions meeting from Tokyo to Frankfurt to Ottawa are pondering the prospect of another lost quarter amid renewed lockdowns to contain the pandemic.

Most are likely to maintain current ultra-loose policy settings without committing to more easing as they keep a wary eye on the path of the disease, while crossing fingers on its eventual eradication.

Like many of her counterparts, European Central Bank (ECB) president Christine Lagarde put a brave face on the outlook last week, insisting that forecasts released in December are still “plausible.”

She emphasised how previous uncertainties, such as the US elections, the Brexit trade deal and the start of vaccinations, have eased.

But with rates of infection spiraling higher, and new restrictions on activity being imposed throughout the world, Lagarde and her colleagues at global monetary authorities can only hope that the tantalisingly slow pace of global immunisations will pick up and finally start to dent the impact of the coronavirus.

That sentiment is likely to be shared throughout the plethora of central banks due to meet in the coming days.

Aside from the ECB, they include institutions in Brazil, Canada, Indonesia, Japan, Malaysia, Norway, South Africa, Sri Lanka, Turkey and Ukraine.

“Policymakers in Frankfurt will be feeling a strong sense of déjà vu – an upsurge in Covid-19 infections risks a fresh set of containment measures, potentially with dire economic consequences.

“Fortunately, as the euro area enters a third round of restrictions, financial markets already understand the ECB’s reaction function and that significantly reduces the need for shock-and-awe action at its Jan 21 meeting, ” said David Powell a senior economist.

Elsewhere in the world economy, Chinese GDP will show the economy’s strength at the end of 2020, and Janet Yellen is set to move a step closer to becoming the US’s first female Treasury secretary. — Bloomberg

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