Euro zone needs loose monetary policy until inflation goal near, says Villeroy

PARIS (Reuters) - The European Central Bank will need to keep monetary policy loose until its inflation target is clearly in sight, European Central Bank policymaker Francois Villeroy de Galhau said on Sunday in an interview with German newspaper Handelsblatt. Inflation in Europe's single currency bloc is at its weakest in four years, standing at 0.1% in May and forecast to average 0.3% in 2020, far below the ECB's target of close to but less than 2%. 'We will need a very loose monetary policy until that objective is in plain sight,' Villeroy said in the interview.

Reuters June 29, 2020 00:06:03 IST
Euro zone needs loose monetary policy until inflation goal near, says Villeroy

Euro zone needs loose monetary policy until inflation goal near says Villeroy

PARIS (Reuters) - The European Central Bank will need to keep monetary policy loose until its inflation target is clearly in sight, European Central Bank policymaker Francois Villeroy de Galhau said on Sunday in an interview with German newspaper Handelsblatt.

Inflation in Europe's single currency bloc is at its weakest in four years, standing at 0.1% in May and forecast to average 0.3% in 2020, far below the ECB's target of close to but less than 2%.

"We will need a very loose monetary policy until that objective is in plain sight," Villeroy said in the interview.

Villeroy, who is also the governor of France's central bank, said the coronavirus crisis was increasing the deflationary risks weighing on the euro zones' economies, mainly because demand was recovering more slowly than supply.

He said it was out of the question to "give in to fiscal domination" and distort monetary policy so as to lighten the burden of public debt.

But he said the inflation objective could be clarified during a strategic review on being symmetric, meaning an equal tolerance of undershooting the target as of overshooting it.

Villeroy said the review would bring more credibility to the target.

He also expressed optimism a solution would be found following a ruling by Germany's Constitutional Court over ECB bond purchases that sent shockwaves around Europe.

In its May ruling, the court gave the ECB three months to justify bond purchases under its stimulus programme or lose the Bundesbank as a participant.

"There is now hope that a solution to respond to Karlsruhe is close," Villeroy said, referring to the top court.

Asked if the ECB should buy junk debt as part of its bond purchases, Villeroy said: "I exclude that we buy bonds that were 'junk' before the crisis."

(Reporting by Richard Lough; editing by Barbara Lewis)

This story has not been edited by Firstpost staff and is generated by auto-feed.

Updated Date:

TAGS:

also read

U.S. to double public climate finance to developing countries by 2024
World

U.S. to double public climate finance to developing countries by 2024

By Andrea Shalal WASHINGTON (Reuters) -The United States said on Thursday it would boost public climate finance to help poor countries reduce greenhouse gas emissions and adapt to a changing climate, doubling funding by 2024 from high average levels hit during the Obama administration. The White House said it was embracing "ambitious but attainable goals" for international aid to developing countries, given the urgency of the climate crisis and to compensate for a sharp drop in U.S. funding during the Trump administration.

More risks to pregnant women, their newborns from COVID-19 than known before - study
World

More risks to pregnant women, their newborns from COVID-19 than known before - study

(Removes extraneous word 'while' in paragraph 3) (Reuters) -Pregnant women infected with COVID-19 and their newborn children face higher risks of complications than was previously known, a study by British scientists showed on Friday. An infection of the new coronavirus in such newborns is associated with a three-fold risk of severe medical complications, according to a study conducted by scientists at the University of Oxford. (https://bit.ly/3tNwkJ7) Pregnant women are at higher risk of complications such as premature birth, high blood pressure with organ failure risk, need for intensive care and possible death

Spain's left-wing leader, interior minister get death threat letters
World

Spain's left-wing leader, interior minister get death threat letters

MADRID (Reuters) -Anonymous death threat letters with bullets enclosed in the envelopes have been sent to two of Spain's top security officials and the leader of the hard-left Unidas Podemos party, officials said on Friday, adding police are investigating.