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In bid to boost economic recovery, ECB to continue with stimulus support

ECB's stimulus package is working as economic revival starts for many countries

The European Central Bank, which has carved out a huge stimulus package to boost recovery for its 19 member countries amid the Covid 19 pandemic, is expected to continue with the support till at least early next year.

“Preserving favorable financing conditions over the pandemic period remains essential to reduce uncertainty and bolster confidence, thereby underpinning economic activity and safeguarding medium-term price stability,” ECB President Lagarde said at a press conference in April.

An AP report said that “any talk of a stimulus taper could mean higher borrowing costs for companies — the last thing the ECB wants right now.”

As part of the Euro 1.8 trillion stimulus package, the ECB has been purchasing government and corporate bonds. This is the largest stimulus package ever financed in Europe.

“Any hint, however, that the ECB is thinking about tapering the purchases could send market rates higher earlier than the central bankers would like. That's why any discussion could be postponed until the bank's Sept. 9 meeting or later,” the AP report said.

Even as several European economies have started showing signs of recovery, tapering stimulus will pose a challenge.

“She faces a balancing act: acknowledging improving economic data without triggering a premature market reaction that anticipates the eventual reduction in central bank support for the economy,” the report said.