Bundesbank Head Jens Weidmann admitted Germany’s economy will certainly be weigh down by global coronavirus outbreak. The economy could miss the central bank’s forecast of 0.6% GDP growth this year. There are numerous trade-related risks to the export-led economy. “Based on the current information, I am expecting this risk to actually materialize to a degree,” he said.
But Weidmann also echoed ECB President Christine Lagarde’s comment that the spread of the coronavirus doesn’t warrant a monetary policy response yet. He questioned “whether you’re likely to go out to restaurants more often” if interest rates are lower.
ECB Governing Council member Vitas Vasiliauskas said the central has a “wait and see approach” regarding the development of the coronavirus. And, “there is no problem for the governing council to meet in some extraordinary way, not to wait until the next monetary policy meeting.”
Meanwhile, Eonia money market futures show that a -10bps rate cut by ECB at June’s meeting is fully priced in.
