ECB’s Centeno: Room for Monetary Policy to Keep a Steady Hand
28 June 2021
By David Barwick – FRANKFURT (Econostream) – The European Central Bank has the policy room to maintain a steady hand and continue to ensure favourable financing conditions, ECB Governing Council member Mario Centeno said Monday.
In remarks made at the Conference of the Governors of Mediterranean Central Banks and posted to the website of the Bank of Portugal, which he heads, Centeno said, ‘The timing for removing or alleviating the implemented measures will require a cautious and vigilant approach, carefully tailored to the progress of economic and financial developments.’
‘In the euro area, there is room for monetary policy to keep a steady hand and avoid any unwarranted tightening of broader financial conditions driven by spillovers from a faster recovery elsewhere’, he said.
Fiscal support can continue to be provided flexibly for now, he said. ‘Once the recovery is on firmer ground, the withdrawal of policy support should be gradual and contingent on the state of the economy’, he said.
Monetary policy normalisation should depend on ‘[s]ustained signs of durable inflationary pressures and improvements in labour markets’, while fiscal policy needs to ‘strike the right balance between the consolidation of public finances and support for an efficient reallocation of resources to viable companies’, he said.
‘All is still highly constrained by the evolution of the pandemic’, he added. With an eye toward the pandemic, he said that ‘[w]e are not yet out of the woods’ and called for a great effort to vaccinate everyone globally and ‘help with the recovery of the most affected sectors in our economies.’
That fiscal and monetary policies have acted in concert is significant, he said, and was likely to continue during recovery. He urged the various authorities to ‘explore their strategic complementarities.’