ECB on impact of Coronavirus (March 2)

Luis de Guindos, vice president of the European Central Bank, depicted the coronavirus as an additional ” layer of uncertainty to global and euro area growth prospects,” in his speech at the European Economics and Financial Centre on March 3.

What does Guindos mean?

• The virus can reduce foreign demand for Euro Area exports, given the quarantine measures in China, and the suspension of production lines associated, negatively impacted the global supply chain and production of intermediate goods.
• Travel bans and cities lockdown is also hindering the gowth in euro area services sector.

What has ECB done so far?

• There is a change of tone in the ECB’s stance.
• Previously, President Lagarde said the outbreak had not reached the point to become a long lasting that would impact supply and demand as well as inflation.
• Lagarde now says the “outbreak is a fast developing situation, which creates risks for the economic outlook and the functioning of financial markets,’ in a emergency statement published on Monday, adding that ECB “stand[s] ready to take appropriate and targeted measures” if the virus has implications for the economy, medium-term inflation and the transmission of our monetary policy.