ECB’s policy should remain flexible in the post-crisis period; Visco

Ignazio Visco, a member of the European Central Bank’s Governing Council, believes the European Central Bank should retain some of the flexibility built in its current pond-buying programme for post-crisis stimulus measures.

“I think flexibility should remain — we certainly have to discuss how to adjust our purchase programs,” the Bank of Italy governor said in an interview with Bloomberg Television. “It will help against unexpected shocks, and it will help to avoid fragmentation that may rise again.”

Visco’s remarks contribute to the escalating dispute over the design of the ECB’s post-crisis policy. With consumer prices in the Eurozone rising at a 3.4 percent annual rate – far more than the institution’s 2 percent target – officials face a difficult dilemma on what to do next if its bond buying ceases in March as planned.

Many policymakers, including Visco, have dismissed the current surge as primarily transient, but some have begun to caution that if it fuels rising wages, inflation might become more entrenched.

As a result, the Governing Council is divided on how supportive the central bank’s post-Covid policy should be. Last Thursday, Francois Villeroy de Galhau, a French colleague, urged that the ECB maintain some of the flexibility of the current bond-buying programme as a “contingent option” for future asset purchases.

Others, such as Belgium’s Pierre Wunsch and Estonia’s Madis Muller, have expressed reservations about changing their standard tools.

Visco stated that one option mentioned by the Financial Times over the weekend, increasing the amount of European Union-issued debt that can be purchased, is “something that we may end up doing,” but that it needs to be examined more.

Story by : Norvisi Mawunyegah