— Supports “recalibration” of monetary policy in December
By Laurie Laird
LONDON (MaceNews) – A top European central banker called Friday for increased government spending to combat the economic impact of the recent upsurge in Covid transmission, even as he voiced support for an adjustment of monetary policy by year end.
The European Central Bank is bracing for an economic slowdown, as a number of European countries, including France and Germany, introduce new national lockdowns. “Suddenly we have taken a turn for the worst,” said Yves Mersch, a member of the ECB’s Governing Council.
The economic damage may best addressed by governments, said Mersch, addressing a virtual conference sponsored by UBS. “Most appropriate would be fiscal policy …. It is not for monetary policy to be surgical and to extend credit to companies.”
His views call for a greater role for governments than outlined by ECB President Christine Lagarde following the ECB’s General Council Meeting on Thursday. While Lagarde reiterated her call for governments to keep the fiscal taps open, she appeared to place more emphasis on a coming “recalibration” of monetary policy to be unveiled at the council’s next meeting in December.
Mersch did express support for further ECB stimulus and refused to rule out a cut in interest rates from the current level of -0.5% for the deposit rate. “We still have this instrument available, [but] we will assess the potentially negative effect. Nothing is ruled out; nothing is a given.”
Mersch’s final term at the ECB expires in December, but he will vote at the next Governing Council meeting.