The European Central Bank is not overly concerned by the recent bout of volatility in global markets as the adjustment has been orderly and the impact has been largely contained to equities, ECB board member Benoit Coeure said on Friday.
Speaking to reporters in Skopje, Coeure said volatility was a fact of life and the ECB had to live with it, though it was keeping an eye on financial conditions to see if there is a broader impact on financial conditions or the real economy.
“Market volatility is a fact of life, we’ve got to live with it,” Coeure said. “So far what we see is that the adjustment has been orderly in markets and the spillover to the euro zone, the impact on the euro zone, has been largely contained to the equity market.”
Repeating the bank’s long standing guidance, Coeure said interest rates will not rise until well after the end of bond purchases and policymakers were unanimous agreement over this sequence.
“We have also said that our communication on monetary policy will change and we said it will be discussed in early 2018,” Coeure added. “So far we have not discussed it.”
The ECB’s 2.55 trillion euro bond purchase scheme, due to run at least until the end of September, is expected to wrap up by the end of December after a short taper, according to a Reuters poll of economists.
Economists also predicted that the ECB would wait until six months after the bond buys end to hike rates for the first time and only proceed very cautiously, raising rates back to zero from negative territory by the end of 2019.
The ECB has kept borrowing costs low for years in the hope of inducing consumption and investment with the ultimate aim of generating inflation.
While its measures appear to be working as the euro zone is enjoying a five-year economic growth run, it has taken longer than expected and the bank is likely to continue to run easy money policies even after the bond buys end.
Source: Reuters (Reporting by Kole Casule; Writing by Balazs Koranyi; Editing by Francesco Canepa)