(Reuters) – The European Central Bank expects to remain in crisis-fighting mode until into 2021 to combat an “unprecedented decline” in the euro zone’s economy caused by the coronavirus pandemic, its President Christine Lagarde said on Thursday.
The slowdown, also marked by rapidly deteriorating labour markets, is likely to steepen before the recovery phase kicks in, she told the bank’s post-policy meeting news conference.
While the ECB is already considering options for its exit strategy from the emergency monetary measures it has introduced to cushion the impact of the pandemic, this “return to normal” would not happen over the coming months.
“We are looking at way down and probably out in 2021 in terms of return to a ‘new normal’,” she said.
ECB forecasts due in June and scenario results to be published on Friday “indicate a recovery and an uptick in the situation in 2021.” So the ECB “very much” hopes the crisis will not become a permanent one, she said.
ECB staff projections suggest euro area GDP could fall by between 5 and 12 percent this year, the bank said earlier.
(Reporting by John Stonestreet; Editing by Toby Chopra)