European Central Bank holds off on strengthening stimulus

The European Central Bank held off from strengthening its stimulus programs despite growing concern that a renewed surge in COVID-19 cases could stall the economy’s recovery from the deep downturn early this year

Via AP news wire
Thursday 29 October 2020 12:52
Europe Economy
Europe Economy

The European Central Bank held off from strengthening its stimulus programs despite growing concern that a renewed surge in COVID-19 cases could stall the economy’s recovery from the deep downturn in the first part of the year.

But the ECB signaled that more stimulus could be coming at its December meeting, given that risks are “clearly tilted to the downside” and new staff projections would make possible “a thorough reassessment.”

The bank on Thursday made no change to its 1.35 trillion ($1.58 trillion) pandemic emergency bond purchase program, which pumps newly created money into the economy to keep credit flowing to businesses and promote economic activity. Those regular purchases are set to run through the middle of next year, and some 750 billion remains unused. Analysts say that is one reason the bank is holding off increasing the amount, since there is plenty of stimulus still in the pipeline.

Demand from China has helped keep some European businesses afloat but rising infections have raised concert that the last three months of the year could see far slower growth. Germany is implementing a “lockdown light” under which theaters, bars and restaurants must close for almost a month.

The ECB’s key goal is to raise inflation toward its target of below but close to 2%, the level considered best for the economy. Inflation was minus 0.3% in September, partly a result of temporary measures such as a value-added tax cut in Germany but also a sign of weaker than optimal demand.