ECB’s Wunsch: Policy Normalisation to Be Driven Only by Real Economic Developments
9 April 2021By David Barwick – FRANKFURT (Econostream) – Monetary policy normalisation will be driven by real economic developments and not by financial markets, European Central Bank Governing Council member Pierre Wunsch said Friday.
In an interview with Belgian business daily l’Echo, Wunsch, who heads the National Bank of Belgium, said that Europe could rebound quickly to pre-pandemic levels of economic activity.
‘The normalisation of our monetary policy will be determined exclusively by what we see in the real economy, not by movements in the financial market ’, he said. The ECB has ‘signalled our unwillingness’ to let risen US yields cause spillover effects here, which is why asset purchases were stepped up, he said.
‘I am rather optimistic about the resilience of the European economy, which can return relatively quickly to its pre-crisis level, provided we can get things fully up and running again in the short term with vaccinations’, he said, pointing to the examples of the US and China.
‘However, there is one condition: the restrictions must not last too long’, as the economy could otherwise cease to function normally to a degree that would impact confidence, he said.
As previously, Wunsch observed that households had saved up considerable sums of money during the crisis. Although what happens to this money is uncertain, he said, ‘we can expect to see some of the additional savings boosting the economic recovery.’
Moreover, rising exports can also support the recovery, ‘thanks to the strong Chinese recovery and the stimulus plans of the US administration under Joe Biden’, he said. Public investment will also increase, especially with the recovery fund, he noted. ‘So on all fronts, the pieces of the puzzle are in place for a dynamic economic recovery’, he added.
‘If the tightening of restrictions remains limited in April, the impact will be negligible’, he said. ‘Business and household confidence is holding up and will remain so if we can ease again soon.’