The European Central Bank yesterday’s announcement to keep rates unchanged and introduce temporary measures and relief for banks, has been widely welcomed by experts.
Dr. Kerstin Braun, President of Stenn Group, an international provider of trade finance, said: “Lagarde has taken her toughest test yet as head of the European Central Bank. Any stabilisation created from the ECB’s easing package last September has now been undermined by the effects of the Covid-19 crisis, so Lagarde has had to act forcefully to offset the effects of the coronavirus. Given infections have been identified in every EU country, the economic outlook is worsening as fast as the disease is spreading.
“Largarde is right to keep interest rates unchanged and introduce temporary relief measures instead. Doing so provides greater flexibility for banks to continue supporting households and businesses, which is essential to keep the economy afloat.
“We already know indebted companies will struggle to access further bank loans as credit risk thresholds were reached before the trade war. At the same time, cheaper money won’t have much effect in a supply shock, so we welcome Largarde’s measures and the relief it provides banks. Lowering rates alone isn’t enough to be effective in offsetting the economic impact of Covid-19.
“For us, the plunge in oil coupled with the economic damage of Covid-19 marked the beginning of a global recession. Our research showed that at the beginning of the year, half of UK and US businesses predicted a recession and a third predicted an international global crisis, and just three months into 2020 and we’re starting to see this play out.”