August 2, 2021

Lagarde warns that the delta variant endangers the recovery in full tourist season



The European Union is on track to meet the forecast of having 70% of its population with the complete vaccination schedule before the end of the summer. And the economic takeoff, accompanied by vaccination and recovery funds, is accompanied by “uncertainties” due to the expansion of the more contagious and serious delta variant of the coronavirus. This was stated by the president of the European Central Bank, Christine Lagarde, this Thursday after the meeting of the Governing Council of the entity.

“The recovery of the euro area economy is on the right track,” Lagarde said in Frankfurt: “More and more people are getting vaccinated, and restrictions have been relaxed in most euro area countries. But the pandemic continues to cast shadows, especially as the delta variant constitutes a growing source of uncertainty. ”

Lagarde acknowledged that the economy “has recovered in the second quarter of the year and, as restrictions are eased, it is on the way to strong growth in the third quarter.” He added: “We expect the industry to perform well, even though supply bottlenecks are holding production back in the short term. The reopening of much of the economy is supporting a vigorous recovery in the commodities sector. But the delta variant of the coronavirus could slow down this recovery in services, especially in tourism and hospitality. ”

The president of the European Central Bank has also taken the opportunity to explain that she will not tighten monetary policy in the short term, between now and the end of 2023, when the eurozone economies are expected to return to their pre-pandemic levels. In this sense, it has abounded in the change of policy with respect to inflation, which has gone on to seek “close to 2%, but below” to “close to 2%, but it does not matter if it exceeds it a little” this year and the next.

Thus, the ECB expects interest rates “to continue at their current levels, or at lower levels, until inflation is observed to reach 2% well before the end of its projection horizon. [finales de 2023] and lastingly for the rest of that horizon. “This means that inflation can exceed 2% for some time.

“I would not say that it is lower for longer, but an indication that nobody wants to tighten prematurely,” said Lagarde, who has warned that premature tightening of monetary policy could be “detrimental to the economic recovery “.

“The recovery of the euro area economy is on the right track. But the pandemic continues to cast shadows, especially as the delta variant constitutes a growing source of uncertainty,” warned the President of the ECB, for whom “there is still some way to go. travel before the consequences of the pandemic on inflation are eliminated. ”

“We need to preserve favorable financing conditions for all sectors of the economy during the period of the pandemic. This is essential for the current rebound to become a lasting expansion and counteract the negative impact of the pandemic on inflation,” he defended Lagarde.

The ECB keeps its main interest rates at 0%, the rate at which it lends to banks on a weekly basis, and will continue to charge banks 0.50% for excess reserves.

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