The European Central Bank under Christine Lagarde, its new president, must decide at its governing council meeting on 12 March how to intervene to mitigate the effects of the coronavirus. On monetary policy, almost everyone agrees that beyond a certain point further liquidity injections are ineffective, given generally large holdings of cash. Negative interest rates risk becoming harmful. The ECB must avoid last week’s mistake by the US Federal Reserve. The Fed is better positioned than the ECB, with higher starting rates and higher inflation. Yet the market reacted badly when the Fed reduced rates by a surprise 0.5 percentage points without a convincing explanation.

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