Important Remarks by ECB Officials

The European Central Bank (ECB) does not to reduce its massive stimulus measures until the Eurozone reaches the price stability target with inflation rate reaching 2%, according to ECB Board Member Fabio Panetta said on Monday.

Panetta, former Director General of Bank of Italy and President of the Institute for the Supervision of Insurance, said that the ECB should maintain low interest rates a long time, including in the case of higher interest rates in the United States resulting from the Federal Reserve responding to the expected strong economic recovery.

“This evidence suggests that we should avoid withdrawing policy support, either deliberately or by tolerating adverse spillovers, until the output gap is closed and we see inflation sustainably back at 2%.”

“For the ECB, this implies that we will have to maintain very favourable financing conditions well beyond the end of the pandemic period.”

Failure to reach 2% inflation would have negative consequences on European governments, the private sector, and the poor, he further indicated.

Panetta called for investing roughly 2.8% of the gross domestic product (GDP) this year to enhance the European recovery from the pandemic.

On another note, economic and financial statistics are vital in guiding monetary policy decisions, and central banks need data for improved policymaking, said Philip R. Lane, a Member of the Executive Board of the European Central Bank (ECB) in a speech to the European Statistical Forum on Monday.

“The cross-border integration of production – through both the activities of multinational enterprises (MNEs) and the complex production chains that connect firms specializing in different stages of production, has been an important engine of the globalization of trade, finance and technology. MNEs typically have complex organizational structures made up of interlinked legal entities, including special purpose entities (SPEs).”

Lane further indicated that transactions by MNEs, which are often made intra-group, are sufficiently large to pose challenges to the interpretation of balance of payments and national accounts statistics.

“While this is most visible for financial centres and very open small economies where global firms are large relative to the size of the domestic economy, these factors are also increasingly relevant for understanding the macroeconomic statistics of the euro area and other large economies,” he added.