ECB may act if governments don’t reform faster
THE European Central Bank (ECB) may be forced to bolster its monetary stimulus programs if governments fail to act to boost their economies, board member Benoit Coeure said.
“If there is not much taking place on the structural reform front, if there’s not much taking place on the fiscal policy front ... then the ECB will do more,” Mr Coeure told a Geneva panel discussion.
The ECB’s governing council is to meet on September 8, after members chose to take no new measures at a July meeting weeks after Britain’s shock vote to quit the EU.
With more data on the economic fallout of Brexit available by early September, some observers expect president Mario Draghi to announce new measures.
Mr Draghi said in July that the bank was “ready, willing, and able” to intervene if necessary.
But Mr Coeure warned that “the more we do, the more side effects will materialise”.
Headline interest rates in the eurozone have been negative since 2014, even though the ECB has introduced billions in stimulus.
These include buying 80 billion euros (US$90.7 billion) of government and corporate bonds each month under its “quantitative easing” program, and offering banks cheap loans in a bid to pump cash into the financial system.
Critics have pointed to the schemes’ punishing effects on savers and pension funds even as growth has remained tentative.
One recent data point allayed fears of a Brexit blow to the continent.
The Markit Purchasing Managers Index (PMI) reading for the single currency area rose to a seven-month high of 53.3 points in July.
The index monitors companies’ willingness to spend money and a reading above 50 suggests the economy is expanding. –
Benoit Coeure wants countries to boost their economies.