FRANKFURT (MNI) – The current crisis is likely to have lasting
effects on the real economy, including lower growth potential and higher
volatility, European Central Bank Executive Board member Jose Manuel
Gonzalez-Paramo said Thursday.
“As the crisis is still unfolding, we cannot tell with certainly
how our economic and financial systems will function in the future,”
Gonzalez-Paramo said.
Nevertheless, he said that aspects of the “new normal” should
include “somewhat higher macroeconomic volatility and lower potential
growth.”
We are also likely to see “an upward shift in the pricing of credit
and liquidity risk” as well as “stricter regulation in order to
strengthen the resilience of the financial sector, though probably at
the cost of making financial intermediation somewhat more expensive,”
Gonzalez-Paramo projected.
The role of central banks should also evolve towards a “stronger
inclination towards ‘leaning against the wind’ policies and the
assignment of macroprudential objectives,” he said.
Gonzalez-Paramo argued that the ECB’s two-pillar strategy “ensures
that longer-term risks to price stability, which emanate from evolving
financial imbalances, are not overlooked in the assessment of risks to
medium-term price stability.”
–Frankfurt newsroom +49 69 72 01 42; e-mail:jtreeck@marketnews.com
[TOPICS: MT$$$$,M$X$$$,M$$EC$,MI$$$$,M$$CR$]
