Christine Lagarde says virus will have 'a more pronounced' near-term economic impact

European Central Bank President Christine Lagarde said today that activity in services businesses was being “severely curbed” by the recent rise in coronavirus infections, and that recent economic data “suggest a more pronounced near-term impact of the pandemic on the economy and a more protracted weakness in inflation than previously envisaged.”

The bank’s goal is to raise inflation, which was an annual minus 0.3 percent in November, toward its target of just below 2 percent, the level considered best for the economy.

Lagarde says policymakers must keep support coming for businesses so that viable firms don’t go bust before vaccines can help usher in a lasting recovery.

Vaccinations are expected to begin in most of Europe early next year but it will take months to inoculate large numbers of people and limit the potential spread of the virus.

“One of the reasons we are acting in that respect now is precisely to avoid that potential risk and to take those companies, those corporates, those entrepreneurs, those households to the other side of the pandemic,” she said.

The central bank is acting as new infections hover around record highs in Germany, the eurozone’s biggest economy, and as regional governments weigh new restrictions such as shutting schools or shops carrying non-essential goods.