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ECB Centeno believes that monetary policy will continue "very expansive"

By Sergio Goncalves

LISBON, Apr 28 (Reuters) – The European Central Bank’s monetary policy is expected to remain “very expansionary” to accelerate inflation and help the economy recover from the COVID-19 pandemic, Mario Centeno, a member, said on Wednesday. of the Governing Council of the institution.

The ECB, which kept its expansionary policy unchanged last week, will decide in June the future of its emergency bond purchases as the key pillar of its response to the pandemic, which paralyzed the euro zone economy of 19 countries.

“Monetary policy is expected to remain very expansionary amid the persistent low inflation environment,” Centeno told an economic conference. “Future directions suggest that interest rates will remain low and the purchase program will continue for the foreseeable future.”

Centeno, who is also governor of the Bank of Portugal, said that the main objective of the European system of central banks is to maintain price stability, but “it should also support the overall economies of the Union.”

“Our medium-term orientation has to remain flexible to allow for adjustments, as the impacts are unexpected in nature and size, and 2020 is a great example of that,” he said.

The ECB officially targets an inflation rate “below but close to 2%”, but sources involved in a renewal of ECB policy have told Reuters they will lower that definition to 2% as part of an ongoing strategic review.

Centeno stated that the discussions around the strategic review of monetary policy must be “broad-based and encompass the different elements that are currently at the core of the Union’s policies.”

“Although we have to properly balance the impact of any change, we cannot hide behind limited mandates (from the ECB). We have to be effective. We cannot afford a shortsighted view,” he added.

(Written by Andrei Khalip; edited in Spanish by Carlos Serrano)

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