ECB’s Centeno: Reduction of Support Should Be Gradual; Financing Conditions Must Stay Favourable
30 September 2021
By David Barwick – FRANKFURT (Econostream) – European Central Bank Governing Council member Mario Centeno on Thursday gave a positive assessment of the European economic outlook while urging that monetary policy support be reduced only gradually and financing conditions kept favourable.
In a speech at the CIRSF Conference 2021, Centeno, who heads the Bank of Portugal, said, ‘If the economic adjustment is staggered, so should be the reduction of policy support to the economy. We must keep financing conditions favourable to all economic sectors.
Monetary policy can best deal with the uncertainty by watching closely, keeping a steady hand and being ready to act flexibly, he said.
‘After months of cruel uncertainty, it is with the most pleasure that we can say aloud that the European economy is recovering. The economy picked up strong and fast.’
The second quarter was better than expected and growth would remain rapid, he said, with the economy returning to pre-pandemic levels during 4Q and back at trend by end-2023.
The crisis will leave ‘no permanent economic loss’, but, he indicated, that presumes concomitant policies. ‘Because debt will be higher, employment is still to recover and inequality can be harder to curb’, he added. ‘But there is no reason for us not to aim at it.’
Centeno repeated ECB President Christine Lagarde’s warning that the economy is not yet ‘out of the woods’ and listed new virus variants and persistent supply bottlenecks as being among the risks.
Currently elevated HICP is temporary, being driven by base effects, and would subside below 2% by 2022, he said.