Why the ECB is Optimistic about Recovery in H2?

The President of the European Central Bank (ECB), Christine Lagarde, believes that the European Union (EU) will see strong economic growth and recovery during the second half (H2) of the year.

“Light is at the end of the tunnel. We can see it. It is not yet within touching distance. We still have a few innings to go,” Lagarde told CNBC in a recent interview.

The optimistic expectations come despite the challenging state of the Coronavirus pandemic across the continent, which affected major economies across the Eurozone in a way that led to a return to applying lockdown measures.

Strong Economic Growth and Inflation Targets

The ECB president believes that H2 of 2021 will see a recovery that will actually be moving fast.

However, despite both central banks applying massive monetary easing policies, Lagarde believes that the United States Federal Reserve will be able to achieve its inflation target ahead of the ECB.

“We are in a completely different situation. You know, the U.S. is probably going to hit its inflation targets rather soon. We are very far away from that.”

Flexible Approach

Accordingly, she indicated that the ECB’s approach towards monetary policy is based on complete flexibility. “Flexibility across time, across asset classes, across countries, and we decided when it was needed to expand it, and to expand it we did it twice.”

“If it is necessary to do it again, we will do it again. If it is necessary to spend more than what has been identified, we will do so. If we can spend less because the situation improves fast, we will do so as well. So we will use the flexibility in all respects.”

Vaccines

A core component in the fight against the pandemic is vaccination. Despite the fact that Europe remains relatively slow in the rollout of vaccinations, a challenge that has been worsened by doubts about the efficacy and the possible side effects of many vaccines, the head of the ECB an improvement on this frond.

Lagarde thinks it is possible to raise the rate of vaccination from a current 14% in the EU to about 70% by next summer.