ECB’s Stournaras: No Reason to Tighten Monetary Policy Apart from Removing Pandemic Measures
24 January 2022
By David Barwick – FRANKFURT (Econostream) – European Central Bank Governing Council member Yannis Stournaras on Monday said that there was no reason for the ECB to do more than cautiously withdraw measures linked specifically to the pandemic.
In an interview with Greek television network MEGA, Stournaras, who heads the Bank of Greece, said, ‘The European Central Bank is not going to tighten monetary policy because we are in a different phase of the economic cycle in Europe than America or Britain, for example.’
Observing that ECB President Christine Lagarde had recently indicated that an interest rate hike was not in the cards this year, Stournaras said he ‘absolutely’ agreed.
‘There are many reasons’, he explained. ‘For example, before the pandemic we all feared that we had fallen into what we call a structural recession in Europe, with very, very low inflation. Not too many things have changed.’
Inflation increased because of pandemic-related production constraints, he said. ‘When the pandemic goes away - which it seems to be going away - those barriers will be removed, so inflation will start to fall from the middle of this year’, he reasoned. ‘So, in Europe we see no reason why monetary policy should be tightened, apart of course from the gradual removal of the measures, the emergency measures for the pandemic.’
Greece has a ‘a window of opportunity to get the investment grade’, which it should hasten to do, he said. Investment grade could come ‘towards the end of '22 and certainly in '23’, he suggested. ‘As long, of course, as there are no negative external surprises.’
Greek economic growth last year may have been as high as 9%, he said. Growth in the range of 4.5% to 5% is possible this year, he said.
‘So, this growth will act as a bridge to the fiscal contraction that absolutely needs to be done, so that we do not have problems with the sustainability of the public debt’, he added.