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Financial News: ECB Ready To Do More To Ensure Smooth

ECB Ready To Do More To Ensure Smooth Monetary Policy Transmission, Says Lane

03/13/2020 - 08:31:00 (RTTNews)

(RTTNews) - The European Central Bank will not tolerate any risks to the smooth transmission of monetary policy in all jurisdictions of the euro area, Executive Board member Philip Lane said in a blog post on Friday.

"We clearly stand ready to do more and adjust all of our instruments, if needed to ensure that the elevated spreads that we see in response to the acceleration of the spreading of the coronavirus do not undermine transmission," Lane worte.

The ECB had left its key rates unchanged but unveiled fresh stimulus on Thursday. After the decision, President Christine Lagarde said it was not the role of the ECB to close spreads between sovereign bonds.

After Lagarde's comment, Italian government bonds saw sharp sell offs on Thursday and lifted the spread between 10-year German bunds and Italian bonds.

Economists expect Italy to enter recession due to the mounting damage caused by the spread of coronavirus.

Supporting ECB's decision to hold rates, Lane said a move in the short-term rate is typically most powerful if it is expected to be persistent. This persistence channel is less relevant in the context of the spreading of the coronavirus, he said.

"While this major shock is hitting us at high speed, our baseline scenario is that it will be ultimately temporary in duration," he said.

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