ECB Ready to Cut Rates, Purchase Assets to Offset Epidemic

A senior European Central Bank official signaled Monday that the bank was prepared to cut interest rates or buy assets to support the eurozone economy against the impact of the coronavirus, a shift in tone that suggests mounting concern in Frankfurt over the widening economic fallout.
Speaking in London, ECB Vice President Luis de Guindos warned that the spread of the virus could hurt the eurozone’s exports to China, a major overseas market, while disrupting businesses’ supply chains and curbing demand for services in Europe.
“We remain vigilant and will closely monitor all incoming data. The Governing Council stands ready to adjust all its instruments, as appropriate, to ensure that inflation moves towards its aim in a sustained manner,” Mr. de Guindos said.
Investors are watching closely for how the ECB will respond to an infection that is spreading rapidly through a region already buffeted by trade wars, geopolitical tensions and messy negotiations around Brexit. Stock market indexes in Italy and Germany, two of the nations most affected, have fallen around 15% over the past two weeks, with Italy’s blue-chip index trading more than 3% lower on Monday.
Mr. de Guindos’s comments echo Federal Reserve Chairman Jerome Powell, who signaled on Friday that the U.S. central bank was prepared to cut interest rates to cushion the economy against the effects of the virus.
Unlike the Fed, the ECB has little room to cut interest rates because its key rate is already below zero, at minus 0.5%. The ECB also restarted a controversial bond-buying program in September in an effort to stimulate the region’s weak economy.
The euro jumped against the dollar in recent days, partly reflecting diminishing expectations that the ECB will follow the Federal Reserve in cutting interest rates, analysts said.
Jens Weidmann, the head of Germany’s conservative central bank, cautioned Friday against any immediate policy move by the ECB, even as he warned that Germany’s economy would be hurt by the spread of the virus.

https://www.marketscreener.com/EURO-BRITISH-POUND-EUR-4593/news/ECB-Ready-to-Cut-Rates-Purchase-Assets-to-Offset-Epidemic-Suggests-Official-Update-30094012/