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ECB can take more decisive steps once inflation moves higher

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ECB can take more decisive steps once inflation moves higher

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FRANKFURT (Reuters) – The European Central Bank can tighten monetary policy more decisively once inflation is on a clear path towards the target, leaving behind its gradualist approach, Governing Council member Philip Lane told German business newspaper Boersen-Zeitung. “If we have enough signals, we can get active and move on,” daily Boersen-Zeitung quoted Lane as saying on Thursday. “So our monetary policy does not always have to follow such a gradual and incremental approach as it is currently the case,” said Lane, who is Ireland’s central bank governor. The ECB agreed last month to halve asset purchases from next year but extended the buys until September, arguing that inflation still needed central bank support to rise towards its target of almost 2 percent. Critics have argued that its policy adjustment has been too gradual so far, raising the chance that it falls behind the curve and would have to make a bigger, potentially disruptive adjustment later. “Inflation doesn’t have to reach our goal before we discuss changing our policy,” Lane told the paper in an interview. “But inflation must be clearly on the way towards this goal. At the moment this is not the case.” Arguing that 2018 will be an “interesting” year for monetary policy, Lane said that the bar for another increase in the ECB’s 2.55 trillion euro (£2.26 trillion) asset purchase scheme was higher than before. “Over time, as the economic recovery continues, the likelihood that the goal will be achieved increases. Then monetary policy can undoubtedly be adjusted more decisively,” Lane said.

(Reporting by Balazs Koranyi; Editing by Maria Sheahan)
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