FRANKFURT (Reuters) - The following are key comments by European Central Bank policymakers ahead of the Thursday’s policy meeting, which is expected to approve a fresh stimulus package to prop up growth.
While the final composition of the package is uncertain, policymakers are contemplating a combination of a rate cut, asset buys, a new guidance on interest rates and help for banks in offsetting the side effects of negative interest rates.
Policy hawks, who oppose radical stimulus, have spoken en masse but doves, who make up a majority in the Governing Council, have been unusually quiet in their public commentary.
“I call for particular caution where government bond purchases are concerned because they risk blurring the lines between monetary and fiscal policy. That’s also the reason why the Governing Council installed a couple of constraints.... There is still a degree of leeway within these confines. But I think it would be wrong to question the criteria as such.”
“Based on the current data, it is much too early for a huge package.
“And I am still convinced that the Asset Purchase Program is the ultima ratio, and it should only be used if you have a risk of deflation; and the risk of deflation is nowhere to be seen now.
“It’s important that we come up with a significant and impactful policy package in September.
“When you’re working with financial markets, it’s often better to overshoot than undershoot, and better to have a very strong package of policy measures than to tinker
“I am skeptical about further expansion of the money supply, (of) lowering the deposit rate.
“If (rates change), it should rather go in the other direction.”
“If deflation risks come back on the agenda then I think the asset-purchase program is the appropriate instrument to be activated, but there is no need for it in my reading of the inflation outlook right now.
“If stimulus is warranted to protect the resilience of domestic demand then I think conventional policy easing would be the appropriate instrument to contemplate — so a rate cut.”
Reporting by Balazs Koranyi; Editing by Toby Chopra