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Financial News: ECB's De Guindos Says Bank Will Act If

ECB's De Guindos Says Bank Will Act If Inflation Expectations De-anchor

06/19/2019 - 09:44:00 (RTTNews)

(RTTNews) - European Central Bank Vice President Luis de Guindos said that the central bank will react with a combination of measures if it perceives that inflation is set to deviate from its target, and further asset purchases remain a possibility. Speaking to the broadcaster CNBC, de Guindos said ECB has an ample range of instruments at its disposal and quantitative easing, or QE, is "one of them". "It could a combination of actions that could send, you know, the signal, not just the signal but the determination of the Governing Council that we are open to react," de Guindos told CNBC in the interview broadcast on Wednesday. "For us price stability is key, is our mandate and if we see that inflation expectations start to de-anchor, we will act."

ECB's toolkit includes forward guidance, longer-term loans to banks at cheaper rates called TLTRO, the reinvestment of the proceeds from maturities of assets that were acquired under the massive EUR 2.6 trillion bond purchases scheme that ended in December. On Tuesday, ECB President Mario Draghi said the central bank still has room to cut interest rates and to adopt measures to cushion the side effect from low interest rates.

The stimulus signal from Draghi attracted an accusation from the US President Donald Trump that Europe was engaging in currency manipulation. Risks to the euro area economic outlook remained tilted to the downside, de Guindos said, echoing comments from Draghi, who had also said that indicators for the coming quarters suggest lingering softness.

Benoit Coeure, a member of the ECB Executive Board, said in an interview published on Monday that the bank would consider the impact of negative interest rates and the tiering system if it had to cut rates in future.

While leaving the interest rates unchanged on June 6, the ECB extended its forward guidance to reflect its view that rates will remain at the present level at least through the first half of 2020.

Eurozone interest rates were raised last in July 2011 by 25 basis points.

However, markets have started pricing in a rate cut from the ECB before the end of this year.

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