Europe’s Central Bank reacts

New stimulus measures designed to cushion shock to economy.

The European Central Bank deployed targeted new stimulus measures to cushion the shock to the economy from the virus outbreak, but its president said monetary policy couldn’t do it alone and called for a “decisive and determined” response from governments.

ECB President Christine Lagarde said the economy was facing a “major shock” and that the central bank measures unveiled Thursday were “almost surgically” targeted at areas where monetary policy could help.

But she added that a stronger response from eurozone governments was urgently needed to prevent a recession: “An ambitious and coordinated fiscal policy response is required to support businesses and workers at risk.” She said action should come “in the next few weeks and not months.”

The bank’s governing council decided a stimulus package that included the purchase of up to $132 billion more in bonds this year. The money is newly created and injected into the financial system. It comes on top of purchases worth $22 billion a month it is already carrying out, and would be aimed at corporate bonds, which should help keep credit available to companies.

The ECB said it was also providing more cheap, long-term loans to banks to make sure they have the liquidity they need. And the ECB will temporarily ease some capital requirements for banks to help them keep lending.

The central bank did not cut interest rates as many analysts had expected. Rates are already low, and economists have said deeper cuts might not help much.

“There is a chance that a serious recession would trigger meaningful reform, but for now the onus will remain on the ECB, despite its increasingly depleted arsenal,” economist Rosie Colthorpe said.