ECB’s Vasle: Risks to Forecasts Growing But ECB Measures Still Adequate

30 October 2020

By David Barwick – FRANKFURT (EconoStream) – European Central Bank Governing Council member Boštjan Vasle said Friday that economic developments were increasingly likely to undershoot the ECB’s most recent staff macroeconomic forecasts, but that the ECB’s measures to date remained sufficient.

In a statement issued in his name by the Bank of Slovenia, which he heads, Vasle said that the Council would adjust those measures in December as necessary on the basis of the revised projections.

The public health outlook is experiencing a ‘sustained deterioration’, he said, and ‘[t]he economic recovery has consequently lost momentum in recent weeks.’ Despite the milder downturn on financial markets, which he attributed to supportive monetary policy, ‘the risks to the realisation of the June economic growth forecasts are increasing on a daily basis’, he said.

At the Governing Council meeting on Thursday, monetary authorities took the view that their previous measures ‘were still providing sufficient support for the euro area economy even in the adverse situation’, he said. ‘We will examine the situation again at the December meeting, when new economic projections will be ready, and will adjust our measures as circumstances dictate.’

Echoing the ECB in announcing Thursday’s decision, Vasle said the Council would take a close look at the state of the pandemic, progress with regard to a medical solution and the exchange rate. Based on these factors and ‘a thorough reassessment’ of economic prospects, he said, ‘we will recalibrate our measures at the December monetary policy meeting, to respond to the unfolding situation.’

Vasle noted that third quarter data were still confirming the anticipated recovery, but that the pandemic’s resurgence and the public health reaction were darkening the outlook for the fourth quarter.

‘Further evidence of the deterioration in the macroeconomic picture in the final quarter comes from certain high-frequency indicators, which in recent months have proved to be an effective tool in assessing the state of the economy’, he added.