(C) Bloomberg. Shoppers pass along Zeil Strasse retail high street in Frankfurt, Germany, on Wednesday, Aug. 19, 2020. Germany recorded the highest number of new coronavirus cases in nearly four months, fueling fears about a resurgence of infections across Europe.
(Bloomberg) — European Central Bank policy makers expressed uncertainty at their latest policy meeting about the economic outlook and the extent to which they’ll have to deploy monetary stimulus.
The account of their July session showed officials were reluctant to draw conclusions from early signs of economic recovery after pandemic lockdowns were eased. Chief economist Philip Lane told the gathering that the breadth and scale of the recovery remained uneven and partial.
“At its September meeting the Governing Council would be in a better position to reassess the monetary policy stance and its policy tools,” the account of the meeting showed. “This would provide more clarity regarding the medium-term inflation outlook” and prospects for economic activity.
A sharp initial rebound had some officials speculating in the run-up to the gathering that the ECB might not need to spend the full 1.35 trillion euros ($1.6 trillion) earmarked for purchases under its pandemic program. That debate was reflected in the account, with some policy makers arguing that “the net purchase envelope should be considered a ceiling rather than a target.”
Other officials countered that the “current presumption” was that the envelope of the program “would have to be used in full.”
Since then, prospects for the economy have darkened, with some indicators suggesting activity has plateaued. Lane warned earlier this month that uncertainty about the coronavirus will weigh on consumers and businesses for some time.
Infections are rising again across Europe as peak vacation season is under way. That’s forced some governments to reinstate travel warnings and tighten restrictions on mask-wearing and social contact.
At the same time, unemployment is beginning to creep up — despite generous furlough schemes in many countries. The numbers are likely to rise further in the coming months as governments start to phase out support programs.
In the U.S., central bankers backed off in July from an earlier readiness to set a clearer bar for raising interest rates. Minutes of the Federal Reserve’s last meeting published Wednesday showed officials are committed to keeping policy ultra-loose so long as the coronavirus crisis is significantly holding the economy back.
ECB officials agreed at their last gathering to wait for new forecasts in September before reassessing the outlook. Most economists predicted ahead of the July meeting that the central bank would increase pandemic purchases this year.
(C)2020 Bloomberg L.P.
ECB Signals September to Be Key Month to Read the Economy
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