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ECB’s Praet: ECB could adopt rate guidance if economy slows sharply

The ECB’s chief economist Peter Praet recently crossed the wires saying that the ECB could adopt rate guidance if the economy were to slow sharply. 

Key quotes (via Reuters)

  • What counts for us is medium-term and we see positive and negative factors there.
  • A rebound is likely, but it is too early to say by how much.
  • Biggest problem by far is political uncertainties persisting for so long, related to protectionism, Brexit.
  • Question is how financial sector would react; there’s risk banks could act even more pro-cyclically than usual.
  • TLTROs have been a very useful tool to deal with impairments in transmission of monetary policy, are part of toolbox.
  • We do need to monitor the transmission of monetary policy through banking system carefully.
  • If euro area economy were to slow more sharply, we could adapt guidance on rates, complemented by other measures.
  • Further asset purchases may not be needed at all to ensure that financing conditions are appropriate.
  • It may make sense for ECB to review overall mon pol framework in future, now may not be right time.

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