Jens Weidmann, European Central Bank (ECB) Governing Council member and Bundesbank President, said on Thursday that the nation’s economic outlook relies on the coronavirus (COVID-19) developments after lockdown.
However, the policymakers ruled out expectations that the second coronavirus wave to inflict more economic damage than the first wave.
Additional comments
We expect Germany’s debt burden during the pandemic to be smaller than during the 2008 financial crisis.
German government’s emergency fiscal measures must be terminated once crisis unleashed by the pandemic is over.
2021 general election in Germany should play no role in the decision to end or extend economic rescue measures.
Governments should not expect central banks to keep interest rates low forever.
If price outlook requires it, there must be a turning point in terms of interest rates in the eurozone.
Price pressures in eurozone are expected to remain subdued in coming years.
A shift in interest rate policy can take some time.
Governments should prepare for interest hikes and not pretend that their debt burden is easy to service.
ECB will not take into consideration public debt servicing costs if price stability requires higher interest rates.
FX implications
EUR/USD marked an uptick from 1.2299 to 1.2304 following the news. It should be noted that the pair flirts with 1.2300, the highest since April 2018 by press time.
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