For the first time in months, the European Central Bank has reason to break from crisis-fighting mode -- economic activity is picking up after the COVID-19 hit, markets are stable and agreement on an European recovery fund appears close.
LONDON - For the first time in months, the European Central Bank has reason to break from crisis-fighting mode — economic activity is picking up after the COVID-19 hit, markets are stable and agreement on an European recovery fund appears close.
“We’re getting to the third phase of the crisis response,” Commerzbank head of rates and credit research Christoph Rieger, said. “The first phase saw the ECB in denial, the second phase was a ‘whatever it takes’ moment. The third phase is about reflection.”ECB chief economist Philip Lane recently suggested the bank is on hold after delivering stimulus three times this year.
The challenge for ECB chief Christine Lagarde is to acknowledge that data is improving but reiterate her strong commitment to stimulus, given the full extent of unemployment and corporate bankruptcies may become clear only later. The ECB expects the economy to shrink by 8.7% in 2020 before growing 5.2% in 2021, and Lagarde reckons the worst is “probably past”.
Possibly. Banks borrowed a record 1.31 trillion euros at last month’s ECB offering of cheap, long-term loans. Some believe that mortgage loans might be included in future TLTROs.
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