ECB’s Visco: To Recalibrate in Light of Downside Risks, New Forecasts

30 October 2020

By David Barwick – FRANKFURT (EconoStream) – The European Central Bank intends to recalibrate its policy stance in December in view of the downside risks to the economy and based on the revised staff macroeconomic forecasts available then, Governing Council member Ignazio Visco said on Friday.

According to a text provided by the Banca d’Italia, which he heads, Visco said in remarks for the World Savings Day 2020 that the threat of deflation had receded somewhat, but that expectations of low inflation had grown.

This, he said, is why the Governing Council on Thursday ‘confirmed the need to maintain the very accommodating orientation of monetary policy, with purchases of securities that will continue to be conducted in a flexible manner.’

‘At the same time, in the light of downside risks to economic activity and on the basis of the new macroeconomic projections being prepared for the December meeting, monetary policy instruments will be recalibrated in order to respond appropriately to the rapid evolution of the economic and financial situation’, he continued.

Financial conditions have to stay expansionary so as to bolster demand and employment, he said, mitigating the effect of the pandemic on inflation and supporting a return to price stability, which he noted was ‘to be pursued in a sustained and symmetrical manner.’

However, overcoming the crisis ultimately hinges on ‘decisive progress in the health sector’, he said.

The high uncertainty due to the pandemic threatens to dampen production and limit demand, he said, ‘with further negative consequences for the outlook for the global economy in the coming year.’