FRANKFURT (MNI) – The European Central Bank will do whatever is
necessary with its policy interest rates in order to deliver price
stability, while continuing to contribute to financial stability with
its emergency liquidity measures, ECB Vice President Vitor Constancio
said Friday.
In the text of a speech for delivery at the ECB Watchers’
conference here, Constancio noted that one of the key lessons from the
financial crisis is that monetary policy-makers should not wait until
after a crisis has set in to intervene.
“The large output losses during the financial crisis have clearly
demonstrated that for policy-makers to intervene ex-post is suboptimal.
And the financial distress accumulated before the crisis was just too
colossal to be attributed to insufficient attention for inflation on the
side of central banks,” Constancio said.
“A more plausible explanation is that an exclusive focus on
inflation is not enough to define a robust policy strategy. It needs to
be reinforced through a perspective of a leaning-against the wind to
avoid monetary policy becoming pro-cyclical in relation to boom-bust
credit and leverage cycles.”
Once a crisis has occurred, monetary policy must be separated from
policies intended to foster financial stability, he argued. “We clearly
demonstrated this in April when we decided to leave the non-standard
measures unchanged, but at the same time decided to increase our key
policy interest rates,” he said.
“In the future we will continue to live up to our mandate,” he
pledged. “We will do whatever is necessary to deliver price stability in
the medium term, using our policy interest rates, and continue to
contribute to the stability of the financial system, using our
non-standard measures.”
[TOPICS: M$$EC$,M$X$$$,MT$$$$,MGX$$$,M$$CR$]
