ZCZC
BCN-03
VIRUS-ECB-EUROZONE
ECB to talk virus response at March 12 meet
FRANKFURT AM MAIN, March 3, 2020 (BSS/AFP) – European Central Bank chiefs have yet to discuss possible monetary policy responses to the coronavirus epidemic and will talk them over at a March 12 meeting, a central bank source told AFP Tuesday.
“The discussion between the eurozone central bank governors on what action to take has not yet taken place, it will be at the next governing council meeting,” the source said.
Echoing other central banks including the Bank of Japan and Bank of England, ECB president Christine Lagarde said in a statement Monday the bank was “ready to take appropriate and targeted measures as necessary” to deal with the virus outbreak’s economic impact.
Lagarde is set to participate in a telephone conference with G7 finance ministers and central bankers later Tuesday to coordinate their responses.
With the statement from its president, the ECB hoped to calm markets troubled by the prospect of a breakdown in growth momentum caused by the virus.
Spreads between the yields on bonds issued by the eurozone’s biggest economies Germany and France and Italian or Spanish government debt have grown.
Meanwhile market-based measures of inflation expectations have fallen to historic lows around 1.1 percent, well short of the ECB’s just-below-two-percent target.
But many observers already see monetary policy stretched close to its limits, with interest rates at historic lows, monthly “quantitative easing” (QE) asset purchases of 20 billion euros ($22.2 billion) and other buttresses to the economy already in place.
The ECB’s measures are largely aimed at keeping financial conditions loose for prospective borrowers, in the hope of boosting growth and in turn stoking inflation towards its goal target.
Some governors are reluctant to grasp the obvious leavers of further lowering rates or increasing QE.
A further option could be “a special TLTRO” — loans to banks offered at highly favourable interest rates in return for lending on to the real economy — Pictet Wealth Management strategist Frederik Ducrozet tweeted.
That could be targeted especially at vulnerable small- and medium-sized eurozone firms in particular, Ducrozet added.
BSS/AFP/MMA/1425HRS