ECB’s Lautenschlaeger Says `Really Premature' to Discuss More QEby
Board member says more information needed about price risks
ECB's baseline scenario for growth and inflation still intact
The European Central Bank should take more time to assess the risks to its inflation outlook before policy makers discuss whether to expand stimulus, Executive Board member Sabine Lautenschlaeger said.
“We don’t have enough information right now to fully understand the underlying trend,” Lautenschlaeger said in a Bloomberg interview on Thursday at the International Monetary Fund’s annual meetings in Lima. “From my point of view, it is really premature to talk about concrete measures in terms of broadening quantitative easing.”
Lautenschlaeger’s comments signal that a decision about whether and how to adjust the ECB’s 1.1 trillion-euro ($1.24 trillion) bond-buying program may not be on the table when the Governing Council meets in Malta on Oct. 22. As part of the six-strong Executive Board, the former Bundesbank vice president is involved in setting the agenda for the institution’s monetary-policy meetings.
Even so, ECB President Mario Draghi warned again on Friday that an emerging-market slowdown and falling commodity prices pose new risks, and policy makers stand ready to add stimulus if needed. The euro-area inflation rate turned negative in September for the first time in six months, driven by a slump in energy costs, and officials are watching for signs that the decline becomes entrenched.
“We are closely monitoring all relevant incoming information,” Draghi said in Lima. Policy makers “are ready to use all the instruments available within our mandate to act, if warranted in particular by adjusting the size, composition and duration of the asset-purchase program.”
Two thirds of economists in a Bloomberg survey in September said the ECB will add to its bond-buying plan, with a majority of those who gave a timeframe predicting the move will come before the end of the year.
Lautenschlaeger, in tune with her German colleague on the Governing Council Jens Weidmann, argued that the euro-area recovery is still on track, making the need for expanding asset purchases less obvious.
“Here and there, you might see some slowing down or downside risks, but there is also some positive news to consider,” she said. “I have my doubts whether increasing QE would actually help in the long term, whether it would be the right measure to mitigate potential increasing downside risks.”
Lautenschlaeger reiterated her concern that loose monetary policy is substituting for the growth-enhancing reforms that the region’s politicians should be pursuing.
“Monetary policy can do a lot, but it is not the only actor which is able to change the outlook,” she said. “On the contrary, governments have to take their responsibility in ensuring a path to growth via their fiscal and economic policies.”