'Corona Resurgence' Boosts Market Expectations for ECB Support... Focus on Lagarde's Words

Scheduled Monetary Policy Meeting on the 29th... "No Change in Monetary Policy Expected This Time"
Market Anticipates Increase in Bond Purchase Scale at December Meeting

Christine Lagarde, President of the European Central Bank (ECB)
[Image source=Reuters Yonhap News]

[Asia Economy Reporter Jeong Hyunjin] As the novel coronavirus infection (COVID-19) resurges in Europe, raising concerns about a 'double-dip' recession, market attention is focused on whether the European Central Bank (ECB) will introduce additional monetary policies such as expanding its bond purchase program.

According to Bloomberg on the 27th, the ECB will hold a monetary policy meeting on the 29th of this month. Economists and investors expect that the ECB will not seek significant changes in monetary policy at this meeting. What the market is paying attention to is the remarks of ECB President Christine Lagarde. There is anticipation that the December meeting may deliver a message about additional monetary policy measures. In particular, it is expected that an additional 500 billion euros will be added to the bond purchase program at the December meeting.

Recently, as COVID-19 resurges in Europe, governments of countries such as France and Italy have reintroduced lockdown measures like nighttime curfews, which has significantly dampened the expectations of businesses and consumers for economic recovery. Prices, which were already stagnant, are expected to fall further, and unemployment rates are projected to rise, according to the market. The Eurozone's third-quarter GDP for this year is scheduled to be announced on the 30th, with experts expecting a 9.5% increase compared to the previous quarter, but there is also a possibility that the economy will return to a decline in the fourth quarter.

Jill Mox, Chief Economist at AXA SA Group, stated, "The market will likely be disappointed if there is no clear hint of additional action in December," adding, "By acting now, the ECB would demonstrate decisiveness, but uncertainties still remain." Bloomberg reported that monetary policy authorities need to determine the scale of stimulus measures necessary for economic recovery, and in that regard, there is still time for careful consideration. This is because more than half of the 1.35 trillion euro pandemic bond purchase program remains unused.

David Powell, a Bloomberg economist, said, "Clouds are darkening the Eurozone economy, and President Lagarde will have to acknowledge this." President Lagarde has already expressed concerns, noting that the economy is recovering more slowly than expected. Regarding the resurgence of COVID-19, she also described it as a "bad sign." Piet Christiansen, Chief Strategist at Danske Bank, emphasized, "Additional bond purchases will not alleviate the gloomy outlook for prices or the economy," and stressed, "The most important thing the ECB must do is to introduce and support stimulus measures to prevent a potential market breakdown."

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