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ECB policymakers open to more stimulus, if needed

FILE PHOTO: Member of the German advisory board of economic experts Isabel Schnabel poses ahead of a news conference in Berlin, Germany, November 6, 2019. REUTERS/Fabrizio Bensch

FRANKFURT (Reuters) - The European Central Bank remains open to boosting its already generous stimulus measures, several policymakers said on Wednesday, further nuancing the bank’s unexpectedly sanguine policy message from last week.

The ECB kept policy unchanged on Thursday and expressed only mild discomfort with the strong euro, but members of its policymaking Governing Council have since appeared to place more emphasis on risks, including from the exchange rate.

“One cannot rule out the ECB may have to add more stimulus,” Spanish central bank chief Pablo Hernandez de Cos said.

Inflation has missed the ECB’s target of almost 2% for seven years and one element of surprise for investors last week was the bank’s new long-term projections, which showed muted price pressures for years to come, despite unprecedented stimulus.

ECB board member Isabel Schnabel argued that raising inflation will be key and failure to get price growth in the 19-country euro zone moving towards the ECB’s target could be the trigger for action.

“We continue monitoring incoming information carefully, including developments in the exchange rate, and we stand ready to act if the incoming data is not consistent with the objective of our emergency measures to close the inflation gap that has emerged as a result of the pandemic,” Schnabel told AFP.

But Schnabel, who is in charge of the ECB’s market operations, added that the bloc’s recovery from its pandemic-induced recession will take time, so that inflation will not rise quickly either.

“We see that our measures provide tangible support to core inflation, which was, however, partly offset by other factors,” she added.

Reporting by Balazs Koranyi; Editing by Alex Richardson and Catherine Evans

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