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ECB must not turn blind eye to stability risks: Lautenschlaeger

Kitco News

FRANKFURT (Reuters) - The European Central Bank must be mindful of financial stability risks, including those created by its own ultra easy policy, ECB board member Sabine Lautenschlaeger said on Friday, weighing in on a recent debate.

“The ECB cannot and should not turn a blind eye to risks to financial stability,” Lautenschlaeger said in Malta. “Without financial stability, it becomes quite hard to ensure price stability.”

Policymakers have recently debated what role the ECB should have in maintaining stability with some arguing for broader responsibility and others making the case that it should focus on inflation only and leave stability to political authorities.

Lautenschlaeger warned that the ECB’s own bond purchases, due to end in December, could also increase stability risk by reducing liquidity and distorting asset prices while its low rates could fuel asset price bubbles.

Reporting by Balazs Koranyi; Editing by Maria Sheahan

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