BERLIN (Reuters) - The European Central Bank is ready to act if necessary to help inflation move towards its aim of close to but below 2% in the euro zone, board member Benoit Coeure said on Wednesday ahead of the bank’s policy meeting next week.
The ECB’s Governing Council put off any rate hike for at least a year at its June 5-6 meeting and President Mario Draghi emphatically opened the door to more stimulus in the following weeks. The Council is due to meet again to discuss monetary policy on July 24-25.
“Looking ahead, the Governing Council is determined to act in case of adverse contingencies and also stands ready to adjust all of its instruments, as appropriate, to ensure that inflation continues to move towards the Governing Council’s inflation aim in a sustained manner,” Coeure said.
Speaking before a meeting at France’s public audit office, Coeure said the euro zone economy, which expanded by 0.4% quarter-on-quarter in the January-March period, was showing signs of “somewhat weaker growth” in the second and third quarters and added that risks remained tilted to the downside.
Coeure pointed to continuing trade weakness resulting from global uncertainties, which were hurting the manufacturing sector.
Governing Council member Ignazio Visco said on Friday that the ECB would need to adopt further expansionary measures if the euro zone economy does not pick up, adding that it would consider its options “in the coming weeks”.
Coeure said measures of underlying inflation remained generally muted but it was seen increasing over the medium term.
Turning to the European Union’s banking union, Coeure said this needed to be completed and should include a European deposit insurance scheme (EDIS), adding: “The ECB has proposed that EDIS could be accompanied by risk-based contributions by banks linked to their sovereign holdings.”
He also said Britain’s expected departure from the European Union would make it even more necessary to develop and integrate the European Union’s capital markets.
Reporting by Michelle Martin; Editing by Paul Carrel and Peter Graff