ECB’s Lagarde Predicts Strong 3Q But Stresses Uncertainty of Outlook

21 September 2020

By David Barwick – FRANKFURT (EconoStream) – Although the third quarter should bring significant economic improvement, the recovery remains very much shrouded in uncertainty, European Central Bank President Christine Lagarde said Monday.

In remarks for delivery at the Franco-German Parliamentary Assembly, Lagarde, according to a text provided by the ECB, stuck closely to her previous language on the exchange rate and the ECB’s willingness to take further action.

‘While incoming data suggest that we will see a strong rebound during the third quarter, the strength of the recovery remains very uncertain, as well as uneven and incomplete’, she said, noting the decisive influence on economic developments of the further course of the pandemic.

The ECB’s pandemic emergency purchase programme (PEPP) is temporary, Lagarde noted incidentally. The PEPP and the ECB’s liquidity provision via targeted longer-term refinancing operations (TLTROs) have succeeded in stabilising markets and are supporting the restoration of price stability, she said.

‘At the same time, the uncertainty of the current environment requires a very careful assessment of the incoming information, including developments in the exchange rate, with regard to its implications for the medium-term inflation outlook’, she said.

Should the situation warrant it, monetary authorities will adjust their policy to keep inflation sustainably en route towards its objective, keeping in mind the commitment to symmetry, she said.

Lagarde praised the fiscal measures taken to address the crisis. With these, Europe is benefitting from ‘an aggregate policy mix in which fiscal and monetary policy reinforce each other in supporting the recovery, and thus underpin medium-term price stability.’