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ECB's Lagarde prepared to add stimulus, cut rates for economic recovery

ECB’s Christine Lagarde is prepared to add stimulus relief and cut rates to help Europe's economy recover faster. Yahoo Finance's Kumutha Ramanathan discusses.

Video Transcript

ADAM SHAPIRO: Kumutha Ramanathan, welcoming her from London and to the Yahoo Finance On the Move team, to help us talk about Christine Lagarde and some statements she said about additional stimulus.

KUMUTHA RAMANATHAN: Absolutely, thank you so much. Lagarde described Europe's economic recovery as, quote, "being a little bit more shaky than anticipated." She made statements at the Wall Street Journal CEO Council Summit that was earlier today.

Now, with the second wave of infections hitting here in Europe, in France and Spain, specifically, we really have no end in sight when it comes to when the economies of the continent are going to be taking a turn for the better.

But she did want to firmly make clear that she had all tools at her arsenal and was willing to basically fire on all cylinders if necessary. Specifically, she said, effective, efficient, and a proportionate outcome was what she was looking for. And if that meant cutting the key interest rate further below zero, she was willing to do so.

Now, we know that in Europe, the ECB has already been engaged heavily in interventionist measures. That includes, you know, looking at large scale bond purchases, as well as cheap loans for banks that match, roughly, what the Federal Reserve has already done.

But going below that 0% mark has been a step that she has not been willing to take. ECB, the BOE, we know that this is something that a lot of banks are fearful of because the knock-on effect is for the banking community that will say, well, you're going to cut into our profits, which are already hit so hard by COVID.

Now, she also wanted to add that it was almost like a call for action, if you will, for all central banks, saying that they needed to provide more stimulus as was necessary. But individual governments on this side of the pond have really been doing their part. So, so far, no additional aggressive measures have not been necessary, but she said she's not afraid to do it if need be.