“The euro zone economy is expected to be severely affected by the consequences of the rapid increase in infections”

“The Increase in coronavirus cases adds to already high level of uncertainty“, said on Thursday the president of the European Central Bank (ECB), Christine Lagarde, in a speech to the Committee on Economic and Monetary Affairs.

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The key challenge for policymakers will be closing the gap until vaccination is well advanced and recovery can build its own momentum.

Therefore, it is more important than ever that monetary policy and fiscal policy continue to work hand in hand.

The latest surveys and high-frequency indicators indicate that the economic activity in the euro area lost momentum in the fourth quarter.

El rEmergence of COVID-19 infections is affecting service sector activity in particular.

We will approach the current phase of the crisis with the same focus and determination.

Usually, the euro area economy is expected to be severely affected due to the consequences of the rapid increase in infections.

The projections will improve our information set and allow for a thorough reassessment of the economic outlook and balance of risks.

We expect headline inflation to remain in negative territory until early 2021.

Reserving favorable terms for as long as it takes is key to supporting people’s spending, keeping credit flowing, and discouraging mass layoffs.

The PEPP and TLTRO are likely to remain the main tools for adjusting our monetary policy.

Market reaction

The common currency showed little reaction to Christine Lagarde’s comments, as the pair EUR/USD it kept its range close to 1.1850.

The pair is currently trading at 1.1846, moderately flat on the day. The focus remains on the United States Covid updates.