Lagarde: Recovery from pandemic could be bumpy

FRANKFURT, Germany (AP) — European Central Bank head Christine Lagarde warned Wednesday that the economy could face a “bumpy,” “stop-and-start” recovery despite good news about potential vaccines.

The top central banker for the 19 European Union countries that use the euro currency said that lasting changes in behavior could drag out the rebound, and that governments and central banks will need policies that bridge the gap until vaccination is widespread.

“We are seeing a strong resurgence of the virus and this has introduced a new dynamic,” she said in a speech opening an online ECB conference on monetary policy. “While the latest news on a vaccine looks encouraging, we could still face recurring cycles of accelerating viral spread and tightening restrictions until widespread immunity is achieved.”

She said “the recovery may not be linear, but rather unsteady, stop-start and contingent on the pace of vaccine roll-out. In the interim, output in the services sector may struggle to fully recover.”

Stock markets jumped after Pfizer said Monday that early results from trials of its experimental vaccine suggests the shots may be a surprisingly robust 90% effective at preventing COVID-19. The European Commission has said it would sign a deal to secure up to 300 million doses of the experimental vaccine developed by Pfizer and BioNTech.

The eurozone economy rebounded a strong 12.7% in the third quarter amid stimulus efforts by the ECB and governments, and as infection numbers receded from the earlier part of the year. But the number of infections has been rising across Europe, leading to predictions that the recovery will go into reverse in the last three months of the year with falling economic output.

Lagarde said policymakers must ensure that the exceptional downturn remains a one-off blow to the...