Get 40% Off
🚨 Volatile Markets? Find Hidden Gems for Serious OutperformanceFind Stocks Now

ECB puts on brave face as new virus variant spreads

Published 11/29/2021, 03:45 AM
Updated 11/29/2021, 06:08 AM
© Reuters. FILE PHOTO: Bank of France Governor Francois Villeroy de Galhau at the Bank of France in Paris, France, October 22, 2021. REUTERS/Sarah Meyssonnier/File Photo

PARIS (Reuters) -European Central Bank policymakers sought to reassure investors rattled by a new variant of the coronavirus on Monday, arguing that the euro zone's economy had learned to cope with successive waves of the pandemic.

Carrying a "very high" global risk of surges according to the World Health Organization, the Omicron variant is threatening a brisk economic revival and could jeopardise plans by the ECB and other global central banks to dial back emergency support after nearly two years.

But ECB President Christine Lagarde, her deputy Luis de Guindos and French governor Francois Villeroy de Galhau put on a brave face against this new risk.

"There is an obvious concern about the economic recovery in 2022, but I believe we have learnt a lot," Lagarde told Italian broadcaster RAI late on Sunday.

"We now know our enemy and what measures to take. We are all better equipped to respond to a risk of a fifth wave or the Omicron variant."

She was echoed by her fellow countryman and ECB policymaker Francois Villeroy de Galhau who said "successive waves have proven so far to be less and less damaging, and this one shouldn't presumably change the economic outlook too much".

ECB vice-president Luis de Guindos acknowledged the "high degree of uncertainty" and called for keeping all policy options open but he argued much higher vaccination rates should help Europe better deal with these risks.

All major vaccine manufacturers have begun work on a new variant and U.S. firm Moderna (NASDAQ:MRNA) said a new vaccine could be available in large quantities in early 2022.

3rd party Ad. Not an offer or recommendation by Investing.com. See disclosure here or remove ads .

Markets regained composure on Monday as investors awaited further details of the variant, which has caused travel curbs to be reimposed in some countries. [MKTS/GLOB]

UNDER PRESSURE

The ECB is under pressure to reduce its monetary stimulus, starting from its 1.85 trillion euros ($2.09 trillion) Pandemic Emergency Purchase Programme (PEPP), as euro zone inflation makes multi-decade highs above 4%.

But consumer sentiment started turning south even before news of the variant broke last week, data showed on Monday.

"Given the rapid developments over the past days concerning the Omicron variant, the November...reading likely overstates broader sentiment in the eurozone among participants," Rory Fennessy, an economist at Oxford Economics, wrote in a note.

"The current uncertainty posed by the Omicron variant adds another headwind to the economic outlook."

The ECB has pledged to run PEPP until the damage wrought to inflation by the pandemic is repaired.

This has arguably happened, with inflation in the euro zone seen hitting 4.4% this month and staying above the ECB's 2% target next year.

De Guindos said on Friday that PEPP would end in March as planned and the debate among policymakers was about "alternatives".

With the PEPP decision seen as a done deal before the advent of the new coronavirus variant, euro zone rate setters had mainly been discussing whether to increase bond purchases via other channels, such as the ECB's regular Asset Purchase Programme.

($1 = 0.8861 euros)

Latest comments

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.