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European Central Bank chief economist sees euro-area economy bouncing back from coronavirus

European Central Bank chief economist sees euro-area economy bouncing back from coronavirus
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The European Central Bank expects the euro-area economy to bounce back from the coronavirus outbreak, chief economist Philip Lane said on Friday, playing down concerns that the 19-nation region is slipping into a long-term downturn that could require another interest-rate cut.

Speaking in an interview with Bloomberg TV in New York, Lane acknowledged that the outbreak is “a big headache” for the ECB’s forecasts, and that it “definitely”’ remains a downside risk until it is contained. At the same time, he pointed to robust domestic demand and rising wages.

“The base case is a V-shape” impact that shouldn’t be “dramatic” for foreseeable policy, Lane said. “Even if there is a hit in terms of the initial weeks of 2020, if the recovery happens as we expect in the medium term” this “challenge remains something that’s not going to change our base case.”

Fresh data published Friday showed private-sector economic activity growing at the fastest pace in six months in February, with services proving resilient even as factory output continued to shrink. Lane said the data came in “broadly in line with what we expected.”

Still, he insisted that the ECB still has room to add more monetary support, saying policy makers are “super clear” that they stand ready to cut rates if necessary.
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