Sunday, 8 January 2017

ECB’s Mersch Signals Inflation Gains Won’t Sway Policy in 2017

In World Economy News 09/01/2017

The European Central Bank will stick to its policy course this year even after latest data showed inflation rates accelerating, Executive Board member Yves Mersch signaled.
“It is absolutely premature today to claim victory over a weak economy,” Mersch, considered one of the more hawkish members of the board, told reporters at an event in Paris on Friday. “We have good results but it is absolutely premature to say: Drop the guard.”
As 2017 gets under way, an apparent acceleration in consumer-price growth on the back of surging energy costs has prompted calls in Germany, the region’s biggest economy, for the ECB to pull back on its stimulus. Mersch said it would take a much bigger shift in the outlook to sway the central bank from its decision last month to extend bond-buying until at least the end of this year.
“We never react” to monthly inflation data, he said. “Unless there is something that would terribly invalidate our projections, our operational decisions exist. They are not subject to revision.”
Euro-area inflation accelerated to 1.1 percent in December, official figures showed on Wednesday. While that’s almost twice as fast as the previous month, it’s still well below the goal of just under 2 percent. The ECB predicts euro-area inflation won’t reach that target until at least 2019.
Even so, Germany saw a record increase to 1.7 percent from 0.7 percent, prompting Bild, the nations’ most-read newspaper, to call on the ECB to “Raise rates now!” Mersch said that at a euro-area level, underlying price pressures were still lacking.
“Wages evolution is still not always at a level that would provoke wage-push inflation,” he said. “We now have a year of operational clarity that allows to assess the effects of our measures and if need be to adjust our strategic positioning.”

Source: Bloomberg