European Central Bank (ECB)

Eurozone central bank acts on coronavirus

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Lagarde urges EU leaders to spend big

Christine Lagarde

As Chancellor Rishi Sunak prepares to deliver his first Budget, the European Central Bank president Christine Lagarde has reportedly warned European Union leaders to spend heavily in the fight against the coronavirus outbreak or pay the price of passivity.

Speaking to the bloc's leaders in a conference call late last night, she said there was a risk of a financial crisis if they did not increase spending to deal withe the outbreak, Reuters reported.

ECB review 'won't be revolutionary'

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According to Melissa Davies, an economist at British financial broker Redburn, the European Central Bank's strategic review is likely to be will be wide-ranging in nature, but perhaps limited in output.

“Inflation remains the main focus and we don't expect anything revolutionary in terms of targets, although the nod to employment suggests a perhaps more US-style dual mandate in future," she said.

“The operating framework has already been changed radically, with scope for further innovation. Environmental concerns could provide a 'wrapper' for further change, including the greening of collateral and quantitative easing assets.”

How the ECB will operate this year

While the European Central Bank conducts a strategic review of its monetary policy, Ms Lagarde said that the current strategy and inflation target of less than 2% will remain in place.

It is predicted that Eurozone growth will likely to stay the same as now in the next few months, according EY Item Club's Howard Archer.

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Finer details of the ECB's monetary policy review

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The European Central Bank has launched its proposed monetary policy review on Thursday.

The review is expected to be concluded by the end of 2020 and will focus on quantitative formulation of price stability, monetary policy toolkit, economic and monetary analyses and communication practices.

The review will also include inancial stability, employment and environmental sustainability.

The ECB said that changes to the world economy and the euro area since 2003 has spurred the review.

Declining trend growth due to slowing productivity and an ageing population, the financial crisis, climate change, rapid digitalisation, globalisation and evolving financial structures have "transformed" the environment in which monetary policy operates, it added.