Off The Wire
ECB must keep options open in face of risks: Villeroy
LUXEMBOURG (Reuters) - The European Central Bank needs to keep its policy options open in the face of growing economic risks, ECB policymaker Francois Villeroy de Galhau said on Thursday, warning against turning its back too quickly on its crisis-fighting tools.
Speaking in Luxembourg, Villeroy said that while the path toward monetary policy normalization remained desirable, it must also be “gradual and pragmatic”.
“We need to keep our options open in the face of the current uncertainty: we are predictable, but not precommitted,” said Villeroy, who is also head of France’s central bank.
“This is also an aspect of our independence, at a time when many are pressing us to provide further details,” he added.
The ECB ended its 2.6 trillion euro ($2.99 trillion) crisis-era asset purchase scheme last month, but has pledged to keep rates at current record lows at least through next summer to support the economy and inflation.
Villeroy said there was no rush to detail further steps toward normalization than those the ECB has already outlined, which also include plans to gradually reduce its stock of assets after the first rate hike.
“We do not need to give additional guidance on the timing or other details of the process until our next spring meeting, when we could be more precise about the sequencing according to the latest economic data,” he said.
With growth slowing in both the euro zone and globally, markets are pushing back rate hike expectations and scaling down bets on inflation returning to the ECB’s two-percent target.
Money markets are now not pricing in an interest rate increase until mid 2020 ECBWATCH while market inflation expectations are close to the lowest level since June 2017. EUIL5YF5Y=R.
Reporting by Leigh Thomas; editing by John Irish