FRANKFURT - The European Central Bank is expected on Thursday to prepare the ground for new stimulus measures, armed with a new set of economic forecasts and amid signs of a resurgence of the coronavirus pandemic.
The Frankfurt-based institution has unleashed unprecedented firepower to help the bloc fight its worst crisis. Across the Atlantic, a major policy shift by the US Federal Reserve has also thrown a spanner in the works. And that, in turn, has led to a significant weakening of the US dollar against the euro, something that could make eurozone exports less competitive."Inflation is too low and declining, the strong euro reinforces this development and there is concern that the change in the longer-term goal of the Fed... will complicate matters," he said.
But what will count most on Thursday"is the question of whether the stronger euro has already opened the door for more monetary stimulus in the coming months," said ING chief economist Carsten Brzeski.The ECB defines price stability as inflation rates of"below, but close to" 2.0 percent. While deflation, or falling prices, benefits consumers in the short run, if they begin delaying purchases in the hope of goods and services becoming even cheaper, it harms companies' revenues and profits and can lead them to cut employment, thus making consumers insecure about employment and likely to hold back spending further.
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