ECB’s Lagarde warns of disinflation as coronavirus crisis transforms economy

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Speaking about alternative growth models at a webinar on Saturday, the European Central Bank (ECB) President Christine Lagarde said that a falling trend in price pressures will persist over the next two years due to the coronavirus pandemic-driven economic transformation.

Key quotes (via Bloomberg)

“The transition to new economic models will be disruptive — they will probably be more disruptive in the first two years, obviously hitting employment and production — and then we can hope it improves productivity.”

“So the inflation dynamic will necessarily be impacted, probably with a disinflationary, deflationary aspect at first, and then inflation dynamic.”

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“The ECB estimates that supply chains will shrink by around 35% and use of robots will increase by between 70% and 75%.”

“An increase in online retail payments since the start of the year, and called on the European Union to develop a single digital market.”

“Pandemics typically increase inequality, with economic and social consequences that the central bank will have to take into account.”

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