— Adds Quotes From Another Speech at Bottom
— ECB Easing Hasn’t Affected Inflation Outlook But Will Watch
TOKYO (MNI) – European Central Bank Governing Council member Christian
Noyer said on Monday that the regional banking union that was decided in June
should be implemented rapidly.
He also told a conference sponsored by Global Interdependence Center that
ECB’s monetary easing, including buying of government debt, has not affected
stable inflation expectations but added that the situation has to be monitored
“The purpose of the banking union is to break that link and create, as a
first stage, a single supervision mechanism in the euro area under the auspices
of the ECB. It is essential that the banking union be rapidly implemented
covering all credit institutions,” said Noyer.
“Moving decisively toward a banking union is one major contributing factor
in reducing uncertainty and boosting confidence.”
Noyer also said, “Uncertainty is a major cause of the current weak
The current recovery appears to be sluggish, uncertain and fragile while
the global growth environment “remains affected by significant uncertainties,”
One major point to the paradox in the present environment is characterized
by “very low interest rates, very large cash reserves in the hands of
corporates, but very little investment,” he said.
“The good news is that a small spark could have huge effects. The bad news
is that this spark has not occurred,” he added.
On policy measures, Noyer said, “Monetary policy cannot by itself remove
“It can contribute to limiting and attenuating its effects. It is also
essential that other sources of uncertainty be dealt with, especially when they
stem from government mechanism must be made operational,” he said.
In the U.S. and Japan, future fiscal uncertainties must be eliminated, he
Bank of Japan Deputy Governor Kiyohiko Nishimura told the same conference:
“Monetary policy can influence the growth potential over a longer term. although
such effects are uncertain and indirect.”
Noyer said, “Monetary policy must be predictable, not in the sense that
each and every move of the monetary authorities be precisely anticipated, but
rather, that their objectives be clear and their actions fully understandable by
“Strong, independent and responsible central banks are, more than ever,
necessary to price and financial stability,” he said.
Noyer noted that there are fears that the whole process of balance sheet
expansion is inflationary.
“Indeed, one important effect of non-conventional policies is to
significantly increase the quantity of central bank money in the economy,” he
“Since, ultimately, inflation is always and everywhere a monetary
phenomenon, it may seem natural to anticipate further inflationary pressures
down the road. While I understand these preoccupations, I do not see, in the
current situation, any reason for concern.”
“True, there has been a strong increase in central bank money and the
situation should be monitored accordingly,” Noyer said.
But he also said the ECB’s monetary easing and fund injections through
purchases of government bonds haven’t affected inflation expectations, which he
said have remained well-anchored.
“Should the situation change, nothing has been done that would impair our
ability to fulfill our primary mandate and preserve price stability. Many tools
are available to absorb liquidity, if it proves necessary,” Noyer said.
There is a concern in the euro area about purchases of government debt as a
form of monetary financing of the government, he said.
Later Noyer, who is also the French central bank governor, told a financial
forum hosted by Paris Europlace in Tokyo that the ECB will continue seeking
price stability while formulating monetary policy without political influences.
“We have always acted and will continue to act within the framework of the
mandate assigned to us by the Treaty: our priority objective is to maintain
prices stability, defined as an inflation rate below but close to 2% over the
medium term,” he said.
“Fears concerning the possible inflationary effects of our policies are
therefore completely unfounded.”
Noyer said: “Moreover, we have always acted, and will continue to act,
totally independently from the political authorities. It has always been
perfectly clear that the responses to the real roots of the crisis can only be
provided by the governments themselves and that monetary policy can never
durably mitigate political shortcomings.
“Thus fears regarding the financing of euro area states are also
groundless,” he added.
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