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ECB's Lagarde Says Eurozone Economy May Resume Growth In Q2

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The European Central Bank President Christine Lagarde on Thursday said the near term outlook for the euro area economy remained clouded with high uncertainty, but data suggest the single currency bloc could expand in the second quarter.

"The near-term economic outlook remains clouded by uncertainty about the resurgence of the pandemic and the roll-out of vaccination campaigns," Lagarde said in the introductory statement to the post-decision press conference.

"Incoming economic data, surveys and high-frequency indicators suggest that economic activity may have contracted again in the first quarter of this year, but point to a resumption of growth in the second quarter," she added.

The ongoing pandemic, including the spread of virus mutations, and its implications for economic and financial conditions continued to be sources of downside risk for the Eurozone economy outlook, Lagarde said.

"Looking ahead, progress with vaccination campaigns and the envisaged gradual relaxation of containment measures underpin the expectation of a firm rebound in economic activity in the course of 2021," Lagarde said.

Earlier on Thursday, the Governing reconfirmed its very accommodative monetary policy stance, by leaving interest rates and the volume of asset purchases unchanged.

The ECB expects headline inflation to increase further in the coming months, but some volatility is expected throughout the year reflecting the changing dynamics of idiosyncratic and temporary factors, Lagarde said.

These factors can be expected to fade out of annual inflation rates early next year, she added.

Meanwhile, underlying price pressures are expected to remain subdued overall, due to economic slack and weak demand.

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