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European Central Bank holds off on strengthening stimulus

Last Updated Oct 29, 2020 at 8:58 am EST

FILE - In this Tuesday Feb. 11, 2020 file photo, Christine Lagarde president of the ECB looks up prior to deliver her speech before the European Parliament's economic and monetary affairs committee at the European Parliament in Strasbourg, France. The head of the European Central Bank says that the economic recovery "risks losing momentum" due to the second wave of coronavirus infections and that the chief monetary authority for the euro countries could add more stimulus if that becomes necessary. (AP Photo/Jean-Franvßois Badias, File)

FRANKFURT — The European Central Bank held off from strengthening its stimulus programs despite growing concern that a renewed surge in COVID-19 cases could stall the economy’s recovery from the deep downturn in the first part of the year.

But the ECB signalled that more stimulus could be coming at its December meeting, given that risks are “clearly tilted to the downside” and new staff projections would make possible “a thorough reassessment.”

The bank on Thursday made no change to its 1.35 trillion ($1.58 trillion) pandemic emergency bond purchase program, which pumps newly created money into the economy to keep credit flowing to businesses and promote economic activity. Those regular purchases are set to run through the middle of next year, and some 750 billion remains unused. Analysts say that is one reason the bank is holding off increasing the amount, since there is plenty of stimulus still in the pipeline.

Demand from China has helped keep some European businesses afloat but rising infections have raised concert that the last three months of the year could see far slower growth. Germany is implementing a “lockdown light” under which theatres, bars and restaurants must close for almost a month.

The ECB’s key goal is to raise inflation toward its target of below but close to 2%, the level considered best for the economy. Inflation was minus 0.3% in September, partly a result of temporary measures such as a value-added tax cut in Germany but also a sign of weaker than optimal demand.

David McHugh, The Associated Press

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