FILE PHOTO: The logo of the European Central Bank in Frankfurt, Germany, on Jan. 23, 2020. REUTERS / Ralph Orlowski / File photo
MADRID / LISBOA, Nov 16 (.) – The European Central Bank’s governing council should increase monetary accommodation to avoid potential market fragmentation problems due to the worsening outlook for both economic activity and inflation, it said on Monday. Pablo Hernández de Cos, one of the members of this body of the ECB.
“Faced with a worsening outlook for activity and inflation, the Governing Council of the ECB should increase the degree of monetary accommodation and avoid problems of fragmentation in the transmission of monetary policy, mainly through the instruments that have proven to be the most effective during this crisis, “he said during a financial event.
With the euro zone likely back into recession this quarter, the ECB has already said it will provide more stimulus in December, most likely through its pandemic emergency bond purchase program and through more favorable loans to the banking sector.
ECB chief Christine Lagarde said last week that this would be based mainly on new purchases of emergency bonds and aid to banks through loans at negative interest rates.
For his part, Mario Centeno, also a member of the Governing Council of the ECB, asked European governments on Monday to provide more aid to an economy battered by the coronavirus pandemic, giving priority to investment projects already underway that benefit both companies and workers.
“Debt levels make massive support prohibitive. We need to be more demanding than before and support measures have to be focused … and temporary,” Centeno told a conference in Lisbon.
Policy makers at the ECB have been cautious despite the prospect of an effective vaccine against COVID-19, warning in recent days that, although this is a source of relief, the euro zone is still facing further restrictions in economic activity to combat the second wave of infections.
(Information from Sergio Gonçalves and Andrei Khalip in Lisbon, and Jesús Aguado and Emma Pinedo in Madrid; edited in Spanish by Jose Elías Rodríguez)