Policymakers at the European Central Bank (ECB) agreed at the April policy meeting that a swift V-shaped recovery could probably be ruled out, and were fully prepared to boost pandemic response if new information before the June meeting shows the current stimulus is not enough, according to meeting minutes published Friday.
“As demand was considered likely to recover only gradually, a swift V-shaped recovery could probably already be ruled out at this stage,” read an account of the ECB’s April 29-30 policy meeting.
In April, the ECB announced staff forecast that put the recession at between 5 percent and 12 percent in the euro area this year, with a medium scenario of 8 percent. The minutes showed that it was generally considered at the meeting that the “mild” scenario was probably already too optimistic.
However, the comment was also made that it was too early to conclude that the “severe” scenario was the most likely, and it was stressed that the outlook and the strength of the recovery would depend critically on the actions of member states and the European Union, and the strength of the overall policy response.
The ECB has rolled out a series of measures to mitigate the economic shock brought by the coronavirus crisis since March, including a 750-billion-euro (817-billion-U.S.-dollar) pandemic emergency purchase program (PEPP) unveiled on March 18.
“The policy measures taken in response to the crisis, most notably the PEPP, had been essential and had limited the likelihood of a self-reinforcing downward spiral,” the meeting minutes showed.
The ECB officials agreed that “It was fully prepared to increase the size of the PEPP and adjust its composition, and potentially its other instruments, if, in the light of information that became available before its June meeting, it judged that the scale of the stimulus was falling short of what was needed,” the record showed.
At the June meeting, new Eurosystem staff macroeconomic projections will also become available.