The European Central Bank will continue to monitor the strength of the euro since it has to play an important role and exercise downward pressure on prices, according to the bank’s president, Christine Lagarde.
“We will continue to monitor it very carefully going forward,” she told the bank’s post-policy meeting news conference late Thursday.
The bank yesterday decided to keep interest rates unchanged, in line with market expectations.
The pandemic continues to pose serious risks to public health despite the good news of upcoming vaccines, she warned.
She added the economic activity in the third quarter was stronger, yet the resurgence in COVID-19 cases and new restrictions are significantly restricting euro area economic activity, which is expected to have contracted in the fourth quarter of 2020.
“Inflation remains very low in the context of weak demand and significant slack in labor and product markets,” she noted.
She said projections suggest a more pronounced near-term impact of the pandemic on the economy and a more protracted weakness in inflation than previously envisaged.
EU inflation is currently negative and not likely to move rapidly towards the 2% level.
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