May 11, 2019 / 1:18 AM / 11 days ago

ECB's Nowotny: Euro-zone growth to strengthen in latter half of '19 - Nikkei

FILE PHOTO - European Central Bank (ECB) Governing Council member and OeNB Governor Ewald Nowotny addresses a news conference in Vienna, Austria March 28, 2019. REUTERS/Leonhard Foeger

TOKYO (Reuters) - European Central Bank Governing Council member Ewald Nowotny said he expects euro-zone growth to rebound in the latter half of this year, paving the way to deliberate normalizing crisis-mode stimulus policies, the Nikkei newspaper reported.

Nowotny also said markets were wrong to interpret ECB President Mario Draghi’s recent comments as signaling that ultra-loose monetary policy would be prolonged, the Japanese economic daily reported on Saturday.

Draghi said in April the ECB would consider steps to mitigate the impact on commercial banks of its negative deposit rate, a remark that led some market players to believe the central bank was preparing to maintain an ultra-easy policy for a prolonged period given weakening growth in the region.

“That was not what we tried to convey,” Nowotny said in an interview with the Nikkei, adding it was premature to debate how to respond if euro-zone growth slowed further because the next policy step would “depend on economic data at the time”.

Nowotny, known to be critical of unconventional monetary policy steps taken by the ECB in the past, said he expected the euro-zone to show stronger growth in the latter half of 2019.

If growth did not rebound, the ECB would need to consider what to do, Nowotny was quoted as saying, adding that resuming quantitative easing was technically possible.

Nowotny said the ECB was not discussing a deepening of negative rates, and the option of adopting a cap on long-term rates - such as one introduced by the Bank of Japan - was unthinkable, the Nikkei said.

The ECB has already pushed back its first post-crisis interest rate rise.

But with weak external demand taking a toll on export powerhouse Germany, the ECB is coming under pressure to do more to support the bloc - albeit with a depleted policy toolbox.

Reporting by Leika Kihara; Editing by Robert Birsel

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