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ECB needed to give strong signal to combat low inflation - ECB's Wunsch

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By Reuters
ECB needed to give strong signal to combat low inflation - ECB's Wunsch
FILE PHOTO: Sign of the European Central Bank (ECB) is seen ahead of a news conference on the outcome of the Governing Council meeting, outside the ECB headquarters in Frankfurt, Germany, March 7, 2019. REUTERS/Kai Pfaffenbach   -   Copyright  Kai Pfaffenbach(Reuters)

BRUSSELS (Reuters) – The European Central Bank’s interest rate cut and fresh bond purchases were needed to combat low inflation, Governing Council member Pierre Wunsch was quoted as saying on Monday in a newspaper interview.

With growth and inflation both slowing, the ECB cut rates deeper into negative territory last week and said it would start an open-ended bond purchase programme to depress borrowing costs further.

“A majority in the Governing Council chose to give a strong signal instead of the risk of running behind events. Then, the period of low interest rates could simply have lasted longer,” Wunsch, who heads the Belgian central bank, told De Standaard.

Wunsch said there was a large consensus among ECB policymakers not to raise interest rates until inflation really picked up, but acknowledged that some had opposed the restarting of bond purchases.

“Every monetary policy has side-effects. In the 80s, the rate increases had a pronounced negative impact on growth,” Wunsch said.

“These have to be monitored. By carrying out a carefully calibrated package of measures, we would prevent side-effects of a particular instrument being disproportionately large,” he continued.

Over a third of the ECB’s Governing Council opposed restarting the asset buys, an unusually high rate of dissent at the euro zone’s central bank.

(Reporting by Philip Blenkinsop; Editing by Catherine Evans)