The European Central Bank’s monetary policy is expected to remain “very accommodative” to prod inflation to life and help the economy recover from the COVID-19 pandemic, ECB Governing Council member Mario Centeno said on Wednesday.
The ECB, which kept its expansive policy unchanged last week, is set to decide in June the future of its emergency bond purchases as the key plank of its response to the pandemic, which crippled the 19-nation euro zone economy.
“Monetary policy is expected to remain very accommodative amid persistent low inflation environment,” Centeno told an economic conference. “Forward guidance points to interest rates remaining at low levels and maintenance of the purchasing program in the foreseeable future.”
Centeno, who is also governor of the Bank of Portugal, said the main objective of the European system of central banks is to maintain price stability but “it should also support the general economies of the Union.”
“Our mid-term orientation has to retain flexibility to allow adjustments as shocks are unexpected in nature and size, and 2020 is a great example of that,” he said.
The ECB officially targets an inflation rate “below but close to 2 per cent” but sources involved in a revamp of ECB policy have told Reuters it would slim down that definition to 2 per cent as part of an ongoing strategic review.
Centeno said discussions around the strategic review of monetary policy must be “broad-based and encompass the different elements currently at the core of the Union’s policies.”
“Although we have to properly balance the impact of any change, we cannot hide behind limited mandates (of the ECB). We have to be effective. We can’t afford a myopic view.”
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