European Central President Christine Lagarde said on Wednesday that eurozone states must keep fiscal spending well into 2022 to protect the bloc from permanent damage caused by the COVID-19 pandemic.

Lagarde called on EU leaders to further kick start the $750 billion euro Next Generation EU spending package in an online interview.

These remarks are in line with her pledge for monetary support for the economy earlier this week when she said the recovery is to be supported by

“favorable financing conditions, expansionary fiscal policies and a recovery in demand.”

“It remains crucial that monetary and fiscal policy continue to work hand in hand. Fiscal policy -– both at the national and at the European level -– remains crucial to bolster the recovery,” she told European Parliament lawmakers on Monday.

Meanwhile, another central bank, the Bank of Japan, is considering signaling to take interest rates further into negative territory; short-term rates are currently at -0.1% and 10-year bond yields around zero. The Japan Times, citing sources familiar with the matter reported,

“In a monetary policy review in March, the central bank may make it clear that it will maintain its negative interest rate policy and that it will not hesitate to cut rates further if necessary.”

However, markets see deeper negative rates as an unlikely policy option that is already putting a strain on commercial banks’ profits. Moreover, there is no consensus within the BOJ on the final decision either.

The BOJ plans to announce its tools next month, with BOJ Deputy Governor Masazumi Wakatabe saying last week that they must

“maintain (their) commitment to achieve 2% inflation. Based on the commitment, we’ll be ready to lower nominal rates as needed.”

Governor Haruhiko Kuroda has consistently said that if the BOJ were to ease further, deepening negative rates would be among the options.

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