The European Central Bank left policy unchanged on Thursday but with the economic recovery losing momentum and a strong euro dampening inflation expectations, ECB President Christine Lagarde is expected to set the stage for more stimulus later.
Having pulled out the stops this spring to halt a historic economic decline across the 19-country currency bloc, the ECB has time to let governments implement their own countermeasures and for its own ultra-easy policy to seep into the real economy. But hurdles to the rebound from a 12 per cent output drop in the second quarter are proving bigger than expected, and economists say the ECB will have to take more action, possibly in December. “The Governing Council continues to stand ready to adjust all of its instruments, as appropriate, to ensure that inflation moves towards its aim in a sustained manner, in line with its commitment to symmetry,” the ECB said after a widely expected decision.
The problem is that fresh data point to waning investor and consumer confidence amid a resurgence in coronavirus infections, with many fearing fresh restrictions on ordinary life.