FRANKFURT (Reuters) – The European Central Bank is ready to take “appropriate and targeted measures” to fight the impact of the coronavirus outbreak, it said on Monday, joining its U.S. and Japanese counterparts in signaling a possible policy move.
With the virus spreading around the globe, governments and central banks are coming under pressures to support growth, which is suffering from travel restrictions, weakening demand, supply chain disruptions and a sharp market sell-off.
“We stand ready to take appropriate and targeted measures, as necessary and commensurate with the underlying risks,” ECB President Christine Lagarde said in a statement on Monday.
“The coronavirus outbreak is a fast developing situation, which creates risks for the economic outlook and the functioning of financial markets,” she added.
Although markets fully price in a 10-basis-point rate cut at the ECB’s March 12 meeting, Lagarde’s hint that the bank would take “targeted” measures suggests it could also opt for other tools that more directly impact the ailing economy.
Such tools could include ultra cheap loans tailored for firms or more liquidity operations to bolster the economy.
They could also include further corporate debt purchases or an increase in the exemption from the ECB’s punitive charge on commercial banks’ excess reserves.
While a rate cut is also possible, the ECB’s key rate is already at record low minus 0.5% and a reduction would not do much more than signal determination to provide stimulus.
Lagarde’s comments come just a day before finance ministers and central bank chiefs from G7 countries are expected to discuss the impact of the epidemic.
Lagarde’s remarks also follow similarly brief statements from Federal Reserve Chair Jerome Powell and Bank of Japan Governor Haruhiko Kuroda, who both signaled readiness to act, taken by markets as virtual assurance of policy easing.
(Reporting by Balazs Koranyi; Editing by Sandra Maler and Dan Grebler)