ECB’s Villeroy Signals No Urgency to Settle Post-Crisis Stimulus

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European Central Bank policy maker Francois Villeroy de Galhau signaled that he’s in no rush to agree on new measures for supporting the euro-area economy to succeed the current emergency tools.

After the ECB concluded an 18-month strategy review last week, raising its inflation goal and deciding to take issues such as climate change and owner-occupied housing costs into consideration, investors are focused on the implications for monetary stimulus. The next Governing Council decision is on July 22.

“Strategy is long term but policy can be adapted at any monetary council meeting,” Villeroy, the Bank of France governor, told reporters on the sidelines of the G-20 gathering in Venice. “We have at least four such meetings between now and the end of the year.”

A key uncertainty is what the ECB means by its acknowledgment that inflation may run moderately above its new target of 2% -- up from “below, but close to, 2%” -- for a transitory period. That also has implications for the future of the 1.85 trillion-euro ($2.2 trillion) pandemic emergency purchase program, which is currently slated to end in March.

Villeroy said the new goal is a “significant change,” but that there is no set definition for how much of an overshoot is acceptable.

“There is no point putting in rules with such-and-such predetermined threshold or duration,” he said. “In the hypothesis that we stop net purchases under the pandemic emergency purchases program next March, our monetary policy will remain very accommodative for as long as necessary, thanks to our quartet of unconventional tools. There is no doubt about that.”

Bank of Greece Governor Yannis Stournaras said on Sunday that the new strategy will leave the ECB better prepared for future crises. Bank of Italy Governor Ignazio Visco said earlier on CNBC that the ECB is not emulating the Federal Reserve with average inflation targeting, which implies a period of catch-up inflation.

“We are not having a price level targeting,” he said. “We are not compensating for what we missed.”

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