Lagarde Will Probably Keep ECB Stimulus Going, Stournaras Says


© Reuters. Lagarde Will Probably Keep ECB Stimulus Going, Stournaras Says

(Bloomberg) — Mario Draghi’s successor as European Central Bank chief will probably favor keeping up ultra-loose policy and stimulus when she takes office in November, according to Governing Council member Yannis Stournaras.

“There are strong monetary, economic, and financial arguments suggesting that the new ECB President, Christine Lagarde, will more or less continue along the same lines,” the Greek central bank governor said in an interview in Athens on Monday.

Stournaras was among the majority of policy makers who backed the inclusion of bond purchases in the stimulus package, which also featured an interest-rate cut, that was unveiled by Draghi on Thursday. While the president claimed “broad consensus” for the move, it was opposed by governors representing more than half the population and economic output of the euro region.

“There are costs and benefits to any decision,” Stournaras said. “But the benefits of taking action now exceeds to a large extent the costs.”

The governor, a member of the Governing Council since 2014, said that the stimulus was justified because of the poor economic outlook faced by the euro zone.

The decisions last week “were necessary because inflation remains very low, medium-term inflation forecasts have been revised downwards and remain far below the ECB’s objective and growth rates indicate a significant slowdown of the euro area economy,” he said. “In addition, risks remain tilted on the downside, especially those related to the trade war and a no-deal Brexit.”

Last week, Draghi intensified his call for governments to join his efforts in supporting the economy. He said then that “it’s high time for the fiscal policy to take charge.”

READ  A Capitalist Is Worried

Stournaras backed that plea, saying that countries which have the means to add budget stimulus should step up to the plate for the common good. The Dutch may signal an end to their policy of debt reduction this week, though Germany remains highly reticent about spending more money.

“Fiscal policy in those euro-area member states with adequate fiscal and current account space does not contribute to the degree necessary to the recovery of the euro area economy,” Stournaras said. “Hence, monetary policy practically and unfortunately remains the only game in town.”

Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.





READ SOURCE

LEAVE A REPLY

Please enter your comment!
Please enter your name here