The slowdown in the euro area economy, in the form of a 1.2% drop in inflation in February and the risk of a fall brought about by the Covid-19 virus epidemic, could prompt the European Central Bank (ECB) to take further targeted accommodative measures on Thursday 12 March.
“The coronavirus outbreak is a fast developing situation, which creates risks for the economic outlook and the functioning of financial markets. The ECB is closely monitoring developments and their implications for the economy, medium-term inflation and the transmission of our monetary policy”, said Christine Lagarde, President of the European Central Bank in a statement on Monday 2 March. “We stand ready to take appropriate and targeted measures, as necessary and commensurate with the underlying risks”, she added.
The meeting of the Governing Council of the ECB on Thursday 12 March in Frankfurt will be the first concrete test for Lagarde, who has been following in the footsteps of her predecessor, Mario Draghi, for the past four months. However, the ECB's key interest rates are already very low, and negative in some instances, and the bank has already relaunched its massive securities purchase programme on the secondary markets.
At the end of February, Vitas Vasiliauskas, the Governor of the Bank of Lithuania, believed that the ECB would not take action at this stage because of a lack of hard data on the impact of the coronavirus on the euro area economy (see EUROPE 12436/15).
On Tuesday, at the end of a remote consultation meeting, G7 Finance Ministers and Central Bankers reaffirmed their commitment to “use all appropriate instruments (...), including fiscal measures” to support economic growth and price stability.
The Eurogroup will hold its own video conference on Wednesday in an expanded format for the 27 Member States, and may issue an agreed press release.
To read the G7 statement, go to: http://bit.ly/38iuWTe
Euro area prices up by 1.2% in February
Annual inflation in the euro area is estimated at 1.2% in February, down from 1.4% in January, according to a flash estimate issued by the Statistical Office of the European Union (Eurostat).
The main contributors to the euro area annual inflation rate for February include food, alcohol and tobacco, which were the largest contributors (2.2%), followed by services (1.6%), industrial goods excluding energy (0.5%) and energy (-0.3%, compared with 1.9% in January). (Original version in French by Mathieu Bion)