ECB’s de Guindos: Ready to Increase Monetary Stimulus if Needed

7 May, 2020

By David Barwick – FRANKFURT (EconoStream) – The European Central Bank is ready to provide additional monetary stimulus if measures to date prove insufficient, ECB Vice President Luis de Guindos said Thursday.

In remarks made by video to the Committee on Economic and Monetary Affairs of the European Parliament, de Guindos predicted a much steeper decline in inflation than that seen so far.

“We remain more determined than ever to ensure supportive financial conditions across all sectors and countries to allow this unprecedented shock to be absorbed,” he said. “We continue to stand ready to make further adjustments to our monetary policy measures should we see that the scale of the stimulus is falling short of what is needed.”

Sentiment indicators for April indicate the second-quarter deterioration of output would exceed the 3.8% quarterly drop of 1Q, he said. Overall this year, the contraction would be between 5% and 12%, he said, while oil price expectations imply that inflation in the next months would probably fall “much further” than April’s 0.3-point drop to 0.4%.

“ECB monetary policy will continue to provide the necessary support so that liquidity gets through to the people of Europe and the real economy,” de Guindos said.

The ECB’s contribution would benefit from reinforcement across the policy range, making “vital” a “sufficiently forceful” fiscal response, he said. Ideally, the crisis would motivate decision makers to “repair, strengthen and deepen” the Single Market and to make progress on the capital markets union agenda, he said.

“Priority should be given to initiatives and proposals aimed at mobilising private savings and improving transparency and information for investors at the European level,” he said. “Given the urgency of the situation, we should be open to any new and innovative ideas which can accelerate progress on the capital markets union.”