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- ECB's Stournaras: Ukraine crisis deflationary over medium to long term
ECB's Stournaras: Ukraine crisis deflationary over medium to long term
"The European Central Bank should continue its bond-buying stimulus programme at least until the end of the year and keep it open-ended to cushion the fallout from any conflict in Ukraine," ECB policymaker Yannis Stournaras told Reuters during early Thursday morning in Europe.
Key quotes
The ECB should formally take rate cuts off the table but also give itself greater leeway over the timing of any hike.
The economic outlook was now ‘much more uncertain’, meaning the ECB should err on the side of caution.
Judging the situation from today's point of view, I would rather favour a continuation of the APP at least until the end of the year, beyond September, rather than bringing the end closer.
I wouldn't be in favour of announcing the end of APP in March.
In my view Ukraine crisis is going to have a short-term inflationary effect – that is prices will increase due to higher energy costs.
But in the medium to long term I think that the consequences will be deflationary through adverse trade effects and of course through the rise in energy prices.
The central bank should ‘increase (its) flexibility’ by taking out ‘shortly’ from its guidance.
Remained to be convinced that the deflationary tendency that prevailed in the eurozone for several years before the coronavirus pandemic had disappeared.
Monetary policy is not well suited to tackle these shocks.
It can do it, but at a very high cost in terms of output and employment. That's why I would urge caution.
EUR/USD stays depressed
Following the news, EUR/USD prices remain pressured around the monthly low, last seen near 1.1248.
Read: EUR/USD slumps to monthly low near 1.1200 as Russia-Ukraine war begins
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