ECB’s Vasle: Current ECB Policy Stance Still More Beneficial Than Harmful
16 July 2021
By David Barwick – LJUBLJANA (Econostream) – The current policy stance of the European Central Bank is still beneficial on balance even considering side effects, ECB Governing Council member Boštjan Vasle said Friday.
Speaking at an event organised by the Slovenian central bank, which he heads, Vasle said that ‘[t]he key message of the strategy is we have adjusted our objective. It used to be below but close to 2%, and now we are targeting 2% inflation.’
Referring to the nonstandard tools the ECB has deployed in recent years, Vasle added that ‘[w]e decided for these instruments to form the standard set that we can employ.’
Proportionality is ‘one of the key guidelines taken into account when taking decisions’, he said. ‘We always take an analytical approach, assess and analyse … side effects that might result, and I can tell you that the current combination of measures still generates more positive effects than negative ones.’
The ECB’s strategy framework is ‘quite different’ from that of the US Federal Reserve, because the Fed pursues a ‘make-up strategy’ in which it seeks inflation rates ‘to make up for what happened in the past’, he said.
‘We will not take active steps … in order for inflation to be above target, but now, when the interest rates are very low, even negative, when a very strong and persistent reaction of policy is necessary … there may be some deviations’, he said.
Vasle criticised the institutional arrangement of one central bank for the euro area versus multiple fiscal authorities as ‘a huge problem.’ ‘At the level of monetary policy we have reacted very quickly but the problem is still here, namely that we didn’t have a single interlocutor at the level of fiscal policy’, he said.