ECB’s de Guindos Hints at Possible Need for More Easing This Year

1 October 2020

By David Barwick – FRANKFURT (EconoStream) – European Central Bank Vice President Luis de Guindos on Thursday hinted that the ECB might have to provide additional monetary accommodation this year in the absence of adequate support from fiscal policies.

In an interview with newswire MNI, de Guindos was asked whether 2020 could end without the ECB taking further measures if fiscal support were adequate, to which he responded, ‘We need to look at the overall picture. I would not say that that's necessarily going to be the situation.’

In an apparent contradiction of his Executive Board colleague Fabio Panetta, de Guindos said there was ‘no evidence of financial tightening. This is something we have avoided.’

On September 22, Panetta had said, ‘The sustained appreciation in the external value of the euro has brought about an undesirable tightening of financial conditions and has offset some of the monetary accommodation provided by our measures.’

De Guindos, echoing Governing Council member François Villeroy de Galhau last week, said the ECB had not run out of ammunition. It could, if warranted, adjust the parameters of the pandemic emergency purchase programme (PEPP) anew, he said. However, he added about such a decision, ‘in my opinion, it's not necessary for us to take it immediately.’

In other comments, queried about the role of the exchange rate in the ECB’s deliberation, he said that ‘[i]f any concrete situation or variable jeopardises our inflation objective, for sure we will react. That's common sense, and it's part of our reaction function.’