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ECB Stimulus Needs Consensus to Be Credible, Policy Maker Says

EconomyAug 26, 2019 09:56AM ET
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© Reuters. ECB Stimulus Needs Consensus to Be Credible, Policy Maker Says

(Bloomberg) -- European Central Bank policy makers will need to muster a broad consensus in favor of more monetary stimulus in September to make it credible, Governing Council member Peter Kazimir said.

While expectations among investors and economists are growing for package of measures in September, there’s a risk of a split among officials on how comprehensive their response should be. Bundesbank President Jens Weidmann warned against a panicky reaction over the weekend, saying he would be cautious about restarting bond-purchases.

“The most important thing is for us is to be credible,” Kazimir, who heads the Slovak central bank, told Bloomberg in Bratislava, adding that he is leaning toward “action, doing something” at the meeting next month. “We need to take steps that are credible in the eyes of the market. Credibility also means broad unity and agreement on the measures.”

Finnish central banker Olli Rehn said earlier this month the ECB should come up with a significant package of stimulus measures in September that overshoots market expectations. The Governing Council is widely expected to cut its deposit interest rate deeper below zero, but a resumption of quantitative easing could be politically toxic in some nations, especially if it requires the ECB to lift its own limits on how much it can buy.

Kazimir said he’s “confident” a broad agreement will be reached, and that there are no limits on what measures the ECB could pick from its toolbox. Views on the economic outlook could differ across the euro area because member states have different needs, so finding a consensus that’s good for the currency area as a whole will be key, he said.

“I’d prefer the broadest agreement,” Kazimir said. “We will need to see hard data to be able to assess the seriousness of the situation.”

ECB Stimulus Needs Consensus to Be Credible, Policy Maker Says
 

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