The gesture of Christine Lagarde reflected by itself the concern of the European Central Bank (ECB) on the evolution of the economy in the Eurozone in full swing of coronavirus infections and containment measures in its member countries. The words of the French president confirmed that concern. “The recovery is losing momentum faster than expected” and “the outbreak of Covid-19 is a threat” are some of the sentences left by his appearance this Thursday and, despite this, the entity will wait until December to redefine its measures.
The entity has warned that the Governing Council will take into account the current pandemic scenario to formulate its projections for the month of December and for “recalibrate” the instruments available to face the crisis. “We are already working to recalibrate all our instruments at the next meeting,” Lagarde reiterated several times to make sure it was clear enough. “All instruments”, he stressed, not just the Pandemic Emergency Purchase Program (PEPP).
Lagarde also emphasized the absolute consensus of all the members of the Governing Council to outline the new measures as of December and highlighted the total commitment of the ECB to support the economic recovery of the euro zone. “We did it in the first wave and we will do it in the second”, has explained.
In the statement sent to the media after the monthly meeting of the Governing Council in Frankfurt, the ECB assures that “the new round of macroeconomic projections prepared by Eurosystem experts in December will allow a comprehensive assessment of the economic outlook and the balance of risks “.
Based on this updated assessment, the Governing Council “will recalibrate its instruments, as appropriate, to respond to the current situation and ensure that financing conditions remain favorable to support the economic recovery and counteract the negative impact of the pandemic. on projected inflation, “he adds.
The bank predicts that November will be a “very negative” month in terms of GDP forecasts and also believes that the fourth quarter will be worse than expected.
Keeps the types
Beyond Lagarde’s message, this Thursday no changes in monetary policy were expected and there have not been. In other words, interest rates remain at their levels up to now: 0% for refinancing operations, 0.25% for the loan facility and -0.50% for the facility rate. deposit.
There are also no changes regarding inflation targets. In this sense, the ECB estimates that the price of money will remain at its “current or lower levels” until it considers that inflation forecasts “converge robustly” with a level close enough to, but below, the two%
Market reaction
The markets were awaiting the meeting in Frankfurt in a week marked by continued declines. The uncontrolled increase in contagions in European countries and the new confinements imposed by different governments have fueled the doubts and uncertainties that investors maintain about the recovery in the region.
The declines were especially pronounced in Wednesday’s session, including in the US, and continued this Thursday until Lagarde’s intervention, when they turned around. The Cac 40 in Paris and the Dax in Frankfurt have transformed the morning falls into slight climbs, as has happened with the Ftse Eib in Milan and the Ftse 100 in London.
Only the Ibex 35 it remains negative, although its declines have also softened. The main index of the Spanish stock market left slightly more than 1%, weighed mainly by Telefónica (-6.9%).
The company has seen its profit cut in half (-50.1%) in the first nine months of the year as a result of the impact of the coronavirus and the deterioration of its business in Argentina. The company chaired by Jose Maria lvarez Pallete generated a net profit of 671 million euros until September.
But his setback is not the only one. Indra (-2.8%), Colonial (-2.8%) and Naturgy, Acerinox or REE -all with falls above 2%) also dropped the selective.
Refering to risk premium, remains above 80 points after the escalation of the last days due to the worsening of the sanitary situation in the country.
The yield on the 10-year sovereign bond stands at 0.16% this Thursday, compared to -0.66% for the bund German that is taken as a reference
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