ECB’s Mersch: Unconventional measures are 'temporary’
Published 10/12/2010 | 09:41
European Central Bank council member Yves Mersch said the bank’s unconventional measures are of a "temporary nature" and policy makers will continue to monitor all developments over the coming months.
“The monetary policy stance remains accommodative in the euro region,” said Mersch at a press conference today, when presenting the quarterly report of Luxembourg’s central bank, which he heads.
“This stance, as well as the provision of liquidity and auction methods, will be adjusted according to the situation. The Governing Council will therefore continue to very closely monitor all developments over the coming period.”
The ECB said on December 2 it will keep offering banks as much cash as they want through the first quarter for as long as three months at a fixed interest rate to help fight the region’s sovereign debt crisis.
While the central bank last week chose not to deploy new tools, it has stepped up purchases of government bonds to keep contagion from spreading.
ECB council members will “take into account the fact that unconventional measures were adopted during a period of tensions on financial markets” when adjusting the stance, Mersch said.
Ireland last month agreed to an €85bn rescue from European governments and the International Monetary Fund after the cost of bailing out the country’s banks swelled its budget deficit.
Mersch said that he’s “convinced that Ireland will be able to pull out of these difficulties.”
“But this situation would require the implementation of significant budgetary consolidations in a situation of urgency,” he said.
“Our decision makers are well advised to prevent any risk of this nature by reinforcing as soon as possible the fundamentals of the Luxembourg economy.”
In Luxembourg, the economy will expand between 3.5pc and 4pc this year, according to the central bank. Austerity measures in the 16-member euro region will curb export demand and hurt economic growth, it said.
Euro-region growth will probably remain “moderate” from the current quarter, Mersch said, adding that “uncertainty still remains high” regarding the outlook. He also said that risks to inflation are “broadly balanced.”