ECB President – Lagarde: Uncertainties for economic recovery

The President of the European Central Bank (ECB), Christine Lagarde, continues to see uncertainties for the economic recovery because of the corona crisis – especially because of the currently sluggish vaccination campaigns. The outlook for the euro zone will be influenced by the dynamics of the pandemic and the speed of the vaccination campaign, Lagarde said on Thursday at an online hearing of the European Parliament’s Economic and Monetary Committee.

“We are convinced that 2021 will be the year of recovery,” said Lagarde. However, the upswing will only pick up speed in the second half of the year. Then a “strong recovery of economic activity can be expected”. In this context, Lagarde called for the planned EU development aid to be implemented without delay.

Inflation forecast raised

Lagarde sees downside risks for economic development in the short term. In the medium term, however, it is to be expected that the risks for the upswing will be contained through the better prospects for the global economy and further progress with corona vaccinations.

The ECB President also expects inflation to rise in the coming months. Lagarde thus confirmed the latest statements. The central bank recently raised its inflation forecast for the euro zone this year from 1.0 percent to 1.5 percent. In addition, Lagarde again made it clear that the ECB would monitor the impact of exchange rates on inflation.

ECB provides banks with liquidity

The European Central Bank (ECB) provided the banks in the currency area with ample long-term loans during the corona crisis. In a special refinancing transaction (TLTRO), the 425 participating banks obtained a total of 330.5 billion euros. That is significantly more than the recent deal of a similar kind in December. At that time only a little more than 50 billion euros was in demand.

The interest on the loans with a three-year term depends on the lending of the banks. If the financial institutions pass on the central bank loan to the economy, they can even reduce the burden of the negative deposit interest rate (“penalty interest”). The TLTRO are the third of their kind. The conditions were made even more favorable in the corona crisis. (apa / AFP)

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