FRANKFURT (MNI) – A substantial increase in the European Central
Bank’s inflation forecasts is not likely in the offing, ECB Governing
Council member Yves Mersch said in a newspaper interview released
Thursday.
The head of the Luxembourg Central Bank told Luxembourg daily
Tageblatt that he also did not expect Eurozone inflation to exceed 2% in
the medium term.
Monetary authorities will pursue their sovereign debt purchasing
program (SMP) until official interest rates are again being transmitted
properly via markets, he said.
At the suggestion that there was reason to doubt the ECB’s low
inflation forecast for this year, Mersch said this just reflects the
difference between perceived and actual inflation, due to the more
frequent presence in consumers’ shopping carts of items whose prices
rise.
Still, there are “unpredictable variables” influencing inflation
and “it is always difficult to say how the prices for raw materials or
food — which are dependent on nature — will develop on the world
market,” he said.
“But I don’t believe that a noticeable increase of our inflation
projects is pending. The projections of the ECB coincide with the
expectations of the EU, the IMF and the OECD. I don’t believe that we
will lie above the 2% mark in the medium term,” he said.
Asked how long the ECB would continue to buy Eurozone national
government bonds, Mersch replied, “it is a temporary crisis mechanism.
As soon as the markets and transmission mechanism are functioning again,
we will stop doing so.”
The decision to institute the SMP was not based on political
pressure, he said.
The current crisis is no crisis of the euro, but rather a debt
crisis of some euro area member states, Mersch said. The Maastricht
criteria did not fail but were simply not observed, he noted.
Potential growth in the Eurozone is now at 2% and must be boosted
back to 3% via structural reforms, he said.
–Frankfurt bureau tel.: +49-69 720142. Email: dbarwick@marketnews.com
[TOPICS: M$$CR$,MGX$$$,MT$$$$,M$$EC$,M$X$$$]
