ECB May Not Need to Add Stimulus
The European Central Bank may not need to add stimulus measures after steps in the past three months pushed down the euro, said Governing Council member Ignazio Visco.
“Inflation expectations have to be back where they were,” Visco said Sept. 20 in an interview in Cairns, Australia, where he attended a meeting of Group of 20 finance chiefs.
The single currency has dropped about 6 percent since early June, when the ECB introduced a negative interest rate on excess reserves and presented a four-year lending program to fuel credit.
The extent of the exchange rate’s fall is “more or less, given the moves that were done between June and September, the right response,” said Visco, who also heads Italy’s central bank.
In the first of eight liquidity offers linked to banks’ loan books, dubbed TLTROs, the ECB allotted 82.6 billion euros last week, less than all predictions in a Bloomberg News survey.
ECB President Mario Draghi has committed to increase the central bank’s balance sheet toward 3 trillion euros, the size reached at the height of the sovereign debt crisis in 2012. To reach that goal, “you may need perhaps to do more if inflation remains at this very dismal level,” Visco said.
Finance ministers and central bankers from the world’s leading industrialized and emerging economies said in their communique yesterday that global growth is uneven and is below the pace needed to generate jobs.
The ECB’s ABS component includes purchases of mortgage-backed securities, an asset class whose reputation suffered during the financial crisis. Visco said it was included to increase the size of the program, given the European market for ABS market is small. The ECB’s show of confidence in the product will help reduce the stigma attached to it, he said.
Source: Bloomberg- ECB May Not Need to Add Stimulus
