Risks surrounding the euro area growth outlook remain tilted to the downside, but are now less pronounced, the European Central Bank President Christine Lagarde said Thursday.
"The news about the prospects for the global economy, the agreement on future EU-UK relations and the start of vaccination campaigns is encouraging, but the ongoing pandemic and its implications for economic and financial conditions continue to be sources of downside risk," Lagarde said in the introductory statement to her post-decision press conference.
Amid the resurgence in the coronavirus infections, economic activity is being disrupted in many countries, she noted. Services sector activity is being severely curbed, albeit to a lesser degree than during the first wave of the pandemic in early 2020, she said.
Weak demand and significant slack in labor and product markets suggest that inflation is set to remain very weak in the near term, the ECB chief said.
"Uncertainty remains high, including relating to the dynamics of the pandemic and the speed of vaccination campaigns," Lagarde said.
"We will also continue to monitor developments in the exchange rate with regard to their possible implications for the medium-term inflation outlook."
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