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ECB signals December stimulus coming on new virus lockdowns
[FRANKFURT] The European Central Bank gave a strong indication that it will likely boost its emergency bond-buying programme to stabilise the euro-area economy after governments imposed a spate of new restrictions to control the coronavirus.
For now, the Governing Council held its pandemic bond-buying programme at US$1.6 trillion, reiterating that it will run until at least June 2021 and won't be stopped until the "crisis phase" of the pandemic is past. The ECB's deposit rate stayed at -0.5 per cent.
The policy statement also said though that new economic forecasts in December will set the stage for more support.
"The new round of Eurosystem staff macroeconomic projections in December will allow a thorough reassessment of the economic outlook and the balance of risks. On the basis of this updated assessment, the Governing Council will recalibrate its instruments, as appropriate, to respond to the unfolding situation."
The euro barely budged on the announcement, indicating that the ECB's signal of future action was in line with expectations. The single currency was down 0.4 per cent on the day at US$1.1698 as of 2.12 pm Frankfurt time.
Before the decision, economists predicted the ECB would stay on hold now but add 500 billion euros (S$797.9 billion) to its bond plan in December.
New coronavirus lockdowns announced by Germany and France in the past 24 hours have highlighted how the euro area's outlook has darkened considerably since the ECB's September meeting. The strong summer rebound has given way to a possible double-dip recession, forcing governments to provide more aid and the central bank to keep borrowing costs low.