FRANKFURT AM MAIN, March 3, 2020 (BSS/AFP) – The European Central Bank on
Monday said it stood ready to take action as concerns grow about the impact
of the coronavirus epidemic on the global economy.
The fast spreading outbreak has roiled financial markets and disrupted
international travel and supply chains, fuelling fears that it will take a
toll on economic growth this year.
“The coronavirus outbreak is a fast developing situation, which creates
risks for the economic outlook and the functioning of financial markets,” ECB
chief Christine Lagarde said in a statement.
“We stand ready to take appropriate and targeted measures as necessary and
commensurate with the underlying risks.”
The ECB’s governing council is due to hold its next monetary policy meeting
in Frankfurt on March 12.
Some observers are sceptical that there is much the central bank can do
given its already ultra-loose monetary policy.
The bank has in recent years rolled out unprecedented stimulus measures to
bolster the eurozone economy and drive up stubbornly low inflation.
It has set interest rates at record low levels, offered cheap loans to
banks and bought up more than 2.6 trillion euros ($2.9 billion) in corporate
and government bonds.
Before the outbreak, the ECB had been widely expected to leave its monetary
policy unchanged for a while.
Analysts have now suggested it could opt to cut its bank deposit rate
deeper into negative territory, making it more expensive for banks to park
their cash with the ECB in a bid to encourage lending, or it could ramp up
its monthly bond purchases.
– GDP forecast lowered –
Others have said it could next week offer more generous terms under its
“TLTRO” bank-lending scheme to encourage loans to small and medium-sized
enterprises (SMEs) that are vulnerable to trade upsets caused by the virus.
Frederik Ducrozet of Pictet Wealth Management tweeted that the ECB’s
statement “could be a first hint” at tweaks to the TLTRO scheme, possibly by
offering “looser conditions targeted at SMEs”.
The US Federal Reserve and the Bank of England have also indicated that
they are ready to take action if the virus wreaks havoc on the world’s
economy.
The Bank of Japan has likewise sought to ease worries, saying in a rare
statement earlier on Monday that it “will strive to provide ample liquidity
and ensure stability in financial markets”.
The novel coronavirus outbreak that started in China late last year has now
killed more than 3,000 people and infected some 90,000 as it spreads around
the globe.
The OECD on Monday lowered its global GDP forecast by half a percentage
point to 2.4 percent, the lowest rate since the 2008-09 financial crisis.
That forecast assumes the virus outbreak fades this year, but a more severe
outbreak “would weaken prospects considerably”, the group of free-market
economies said.
In export-driven Germany, Europe’s top economy, Finance Minister Olaf
Scholz recently said the government had the means to “launch a fiscal
stimulus package” if the situation worsened.