Lagarde Pledges Forceful ECB Stimulus Response in December

(Bloomberg) -- European Central Bank President Christine Lagarde promised a forceful monetary stimulus package in December and urged governments to make pandemic relief available “without delay.”

Just hours before a summit of European Union leaders, Lagarde said adopting joint fiscal support should be a priority, warning that the 19-nation euro region is expected to be “severely affected” by the rapid increase in infections and restrictions.

The ECB “responded promptly and forcefully to the first wave that hit the euro-area economies,” Lagarde said during a European Parliament committee hearing on Thursday. “We will address the current phase of the crisis with the same approach and determination.”

The Governing Council holds its next policy meeting on Dec. 10 and has already committed to increasing stimulus at that time. Lagarde reiterated that emergency bond-buying and long-term loans to banks will be the prime tools to ensure credit remains cheap for companies, governments and consumers for as long as the crisis lasts.

At the same time, officials including chief economist Philip Lane have been trying to persuade investors not to focus too much on the size of the December package, stressing that its overall effectiveness is key. Most economists predict an additional 500 billion euros ($592 billion) in bond purchases.

Vaccine Efforts

Speaking about the economic outlook, Lagarde said news about the discovery of vaccines against the coronavirus are “encouraging” but no reason to reduce efforts to support the economy as a mass roll-out will take time.

“The key challenge for policy makers will be to bridge the gap until vaccination is well advanced and the recovery can build its own momentum,” she said. “It is thus more important than ever for monetary policy and fiscal policy to keep working hand in hand.”

EU leaders will hold a video conference on Thursday to discuss joint support, after Hungary and Poland threatened to veto billions of euros of pandemic-relief and budget funds. Lagarde said the package’s additional resources can facilitate expansionary fiscal policies, especially in euro-area countries with limited fiscal space.

©2020 Bloomberg L.P.