Lagarde urges governments to support central bank efforts with fiscal spending

Lagarde urges governments to support central bank efforts with fiscal spending
Christine Lagarde, right, President of the European Central Bank, and German Finance Minister Olaf Scholz speak during an event in Berlin. (AP)
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Updated 14 September 2020

Lagarde urges governments to support central bank efforts with fiscal spending

Lagarde urges governments to support central bank efforts with fiscal spending
  • ECB ‘stands ready to adjust all of its instruments’ to steer the 19-nation currency club through the crisis

FRANKFURT: European Central Bank president Christine Lagarde said Sunday there could be “no complacency” in the battle to recover from the pandemic-induced downturn, urging governments to support central bank efforts with fiscal spending.

Although the eurozone was bouncing back from the lockdowns that devastated economic activity earlier this year, Lagarde said the recovery remained “uneven” and “uncertain” as several nations grapple with a renewed rise in coronavirus infections.

The ECB “continues to stand ready to adjust all of its instruments” to help steer the 19-nation currency club through the crisis, Lagarde said in an online speech addressing a meeting of Arab central bankers.

But she reiterated that eurozone governments had to share the load through public spending and investment.

“Continued expansionary fiscal policies are vital to avoid excessive job shedding and support household incomes until the economic recovery is more robust,” former International Monetary Fund chief Lagarde said.

She urged governments to quickly thrash out the remaining details on the European Union’s €750-billion coronavirus recovery fund “so that the funds can start flowing on schedule in January 2021.”

The ECB itself has taken unprecedented action in recent months to cushion the blow from the pandemic fallout, rolling out a €1.35 trillion emergency bond-buying scheme while keeping interest rates at record lows and offering ultra-cheap loans to banks. The aim is to keep borrowing costs low to boost the economy and push up inflation.

But the ECB’s efforts have been complicated in recent weeks by the rapid rise of the euro against the dollar.

A stronger euro makes imports cheaper, keeping the lid on consumer prices, while exports become less competitive, hurting growth prospects.

Eurozone inflation even turned negative in August for the first time in four years at -0.2. percent — far off the ECB’s inflation target of just under 2.0 percent.

Lagarde acknowledged the concerns, saying that “near-term price pressures will also remain subdued due to the recent appreciation of the euro exchange rate.”

“When it comes to meeting our price stability goal, there is and there will be no complacency,” Lagarde vowed.

The comments were stronger than on Thursday when, after the ECB’s regular monetary policy meeting, Lagarde said the Frankfurt institution was “carefully” monitoring the soaring euro.

Many analysts expect the ECB to unleash more monetary stimulus before the year is over, possibly by extending or increasing its massive emergency bond-buying scheme.


Oil prices rise as market awaits deal output deal

Updated 03 December 2020

Oil prices rise as market awaits deal output deal

Oil prices rise as market awaits deal output deal
  • OPEC and its allies create uncertainty with two-day delay to meeting to decide whether to increase production

LONDON: Oil prices rose on Wednesday as the market awaited a pact from producers on output, which many traders expect will continue to be reined in, and Britain’s approval of a COVID-19 vaccine gave hopes for a demand recovery a boost.

Prices were hit earlier by a surprise build in oil inventories in the US and as OPEC and its allies created uncertainty with a two-day delay to a formal meeting to decide whether to increase production in January.

Brent crude oil futures were up 1.9 percent at $48.31 in late afternoon trade in London, while West Texas Intermediate crude was also up about 2 percent to $45.46.

Industry data from the American Petroleum Institute showed US crude inventories rose by 4.1 million barrels last week, compared with analysts’ expectations in a Reuters poll for a draw of 2.4 million barrels.

The Organization of the Petroleum Exporting Countries (OPEC), Russia and other allies, a group known as OPEC+, postponed talks on next year’s oil output policy to Thursday from Tuesday, according to sources.

The group this year imposed production cuts of 7.7 million barrels per day (bpd) as the coronavirus pandemic hit fuel demand.

It had been widely expected to roll those reductions over into January-March 2021 amid spikes in COVID-19 cases.

But the UAE said this week that even though it could support a rollover, it would struggle to continue with the same deep output reductions into 2021.

“Energy markets will remain on edge until OPEC+ gets past tomorrow’s meeting. Oil prices should continue to have underlying support as vaccine makers announce start dates for beginning immunizations,” he added.

Britain on Wednesday became the first western country to approve a COVID-19 vaccine, jumping ahead of the US and the EU in what may be a first step toward a return to normal life and boost to oil consumption.