Frankfurt / Main (dpa) – The European Central Bank (ECB) keeps more emergency measures open in the Crown crisis. Initially, both the billion dollar bond purchase program and interest rates will remain unchanged, as decided by the Governing Council.
Central Bank President Christine Lagarde, who has been in office for a year, recently emphasized: “If more needs to be done, we will do more.”
Recently, there have been increasing signs that the economic recovery in the euro area is stalling. The corona virus is spreading massively again. In many countries, public life is being restricted again. Many economists assume that the European monetary authorities will once again intensify the fight against the economic consequences of the pandemic.
At the December meeting of the ECB Council (10 December), the ECB could again expand its emergency purchase program for government and corporate bonds. So the central bank has the latest forecasts on the development of the economy and inflation. So far, the PEPP (Pandemic Emergency Purchase Program) has estimated 1.35 trillion euros until at least the end of June 2021.
The ECB has little room for maneuver when it comes to interest rates. The key interest rate in the euro zone has been at a record low of zero percent for four and a half years. Commercial banks have had to pay interest since mid-June 2014 when they deposited money with the central bank. This deposit rate is currently minus 0.5 percent. Exemptions for certain sums are supposed to relieve banks here.
According to the Bundesbank, negative interest rates have so far not been a problem for German banks. However, in a combination of economic downturn, increased risk provision, and reduced equity buffers, the likelihood of reaching a point where negative interest rates lose their effect or become their contrary.
With its monetary policy, which has been expansionary for years, the ECB wants to stimulate the economy and get closer to its goal of a stable price level at just under 2.0 percent inflation. Environmentalists accuse the ECB of buying too many corporate securities in its multi-billion dollar bond purchases, which are bad for the climate. Therefore, the Attac network, critical of globalization, called for a demonstration in front of the ECB building in Frankfurt on Thursday.
A comprehensive review of the monetary policy strategy is currently underway. Among other things, the President of the ECB, Lagarde, relies on dialogue with critics. The French, who took office on November 1, 2019, also wants to include climate change in the considerations.