9 November 2001, 09:38 ECB: Policy Comments
Nov08-Wim Duisenberg said the decision to cut 50bp was "easy" after
looking at new data. HICP to fall "safely below" 2% in 2002. But Sep11
impact larger than previously thought, so EMU recovery to come later
than previously thought. ECB thinks it is unlikely EMU to fall into
recession, but growth in next few quarter to be very weak. ECB still see
recovery in 1st half 2002, but to be "moderate." Rate cut was not
coordinated with Fed/BOE. Rates not appropriate for medium-term
inflation outlook. Downplayed M3 growth. Announced that henceforth ECB
to decision monetary policy only at first meeting each month.
Nov08-ECB cut rates greater-than-expected 50 basis points.
Nov07-Ernst Welteke said the full effect of ECB rate cuts this year
hasn't been felt yet, largely due to continued risk aversion after Sept.
11. But as time passes and markets regain confidence, risk spreads will
diminish, improving financing conditions. Said the growth slowdown would
be "temporary." Conceded that sentiment indicators point to further
weakening of eurozone economic activity. But sentiment is likely worse
than actual conditions. Again played down the ability of either monetary
or fiscal policy to fine-tune the business cycle. Said fiscal policy is
expansive and there is no room for special stimulus steps.
Nov05-Wim Duisenberg said he told Ecofin ministers "our most recent
assessment is that inflation is falling to levels well below the 2%
limit." He added: "It will be early next year, but then it will be well
below (2%) and then it will stay there. I'm sure the Governing Council
will take all the factors leading to this phenomenon well into account.
Nov03-Ernst Welteke expressed concern about long-term inflation
expectations, saying further interest rate cuts might lead to excessive
liquidity. Repeated that real interest rates are low, saying the 100 bps
in ECB rate cuts this year will take time to work through the economy.
Expressed concern about the possible emergence of a speculative bubble,
noting that the gap between M3 growth and the ECB's reference value is
"steadily increasing." Said the current economic slowdown was largely
psychological and that neither fiscal nor monetary policy could boost
consumer and business confidence. Said current ECB policy is not harming
growth. The ECB "can pursue other goals," if there is no danger to price
stability. Said he was "cautiously optimistic" about economic
developments in 2002. Said EMU fundamentals are "largely in order."
Nov01-Lucas Papademos said outside pressure on the ECB to cut rates
was "definitely not helpful" and "may complicate (ECB) decision making."
Oct31-Christian Noyer repeated that the ECB "will change interest
rates if and when it receives new information on the whole of the
eurozone which will let it change its mind on inflation prospects."
Stressed the ECB must make sure that rate cuts doesn't risk price
stability. Stressed again the need for EMU states to maintain
medium-term deficit cut plans and said the world would avoid recession.
Oct30-Otmar Issing said good reasons to expect HICP to fall below
2% in the course of 2002 even though the drop in inflation is taking
longer than the ECB would have liked. Also stressed the ECB has "deaf
ears" to calls for it to neglect its price stability goal. Said the ECB
can act "quickly and decisively" to change rates if it sees the need.
Said 3Q and 4Q EMU GDP would be "extraordinarily weak." While the ECB
expects an EMU economic recovery in the course of 2002, "it is still too
early to say for sure," that the economy has stabilised. Stressed the
difficulty in interpreting data at the moment.
Oct29-Ernst Welteke said Europe is seeing "good news on the price
front," and the ECB will cut interest rates if it can do so without
endangering price stability. Early indicators "point to a further fall
in inflation in the near future." Said EMU growth is now "significantly
below" trend potential, and a return to 2.5% growth "will be delayed."
But there are reasons for optimism, as the expansionary effects of past
rate cuts are still in the pipeline and low real interest rates make EMU
financing conditions "favorable." Said that EMU fiscal policy has no
room to stimulate growth beyond allowing automatic stabilizers to work.
Oct27-Guy Quaden said a rate cut could help lift market psychology
and is likely to follow if EMU inflation and growth continue to weaken.
But he stressed that the current EMU interest rate levels are low
and not hindering growth.
Oct26-Ernst Welteke said the ECB should act "prudently" and not
"hectically," given extreme uncertainty at the moment. Said stabilising
confidence was the key job of EMU policy makers, adding he didn't expect
Europe to fall into recession. Said EMU fiscal policy had "little
leeway" to act due to insufficient consolidation in the past. Fiscal
policy loosening could thus hurt confidence. Said the ECB would have to
watch rising M3 growth closely, but for now there was no inflation risk.
Oct26-Jean-Claude Trichet said the "unfortunate under-valuation" of
the euro made EMU monetary conditions looser but predicted the currency
would see a "clear re-appreciation." Said the ECB's decision to leave
interest rates unchanged wasn't hurting the euro "at all." Said the ECB
would not bend to political pressure for a rate cut. Expressed his "full
confidence" that EMU governments would respect the Stability Pact.
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