ECB's Lautenschlager argues against restarting QE
Sabine Lautenschlager became the third member in as many days at the end of the week to argue against the European Central Bank restarting its quantitative easing programme, saying that there were no signs yet of deflation and warning of the risk of 'moral hazard' by setting the wrong incentives for governments.
In an interview with Market News International conducted on 28 August but published on the ECB's website on Friday, the governing council member did say that "using fiscal space is another possibility for some countries" even as she stressed the need for structural reforms to boost the competitiveness of "many countries" in the single currency bloc.
The weekend before another policy hawk, Bundesbank chief Jens Weidmann, who also sits on the GC, had argued against more monetary stimulus, followed by Dutch central bank boss Klaus Knot on Thursday.
To take note of, some observers, even on the GC itself, believed that a broad consensus was needed in order not to dilute the potency of the signal sent to markets through easing.
On two occasions during the interview, Lautenschlager also said further analysis was needed into the costs and benefits of additional stimulus.
And, she said: "We also need to consider how big the purchase universe is when keeping the current purchase limits. And keeping the limits is for me of utmost importance to address the risk of monetary financing."
When asked if the ECB needed to revise its outlook for the single currency bloc and if so by how much, she said that the current situation was more uncertain due to trade tensions and Brexit but that she also saw signs of strength in the euro area, such as in the labour market and domestic growth overall.
Lautenschlager also said she wanted to see the September data before deciding whether more stimulus was needed to ensure price stability in the medium-term, pointing out that lending to households and corporates remained "high" in July with investment ongoing, despite the uncertainties.
She also said that the ECB's inflation target of "below but close to 2.0%" was not "symmetric".
"Do I think that it needs to be changed? I’m not sure," she said.
The policymaker also voiced "skepticism" about the notion that the ECB's so-called 'forward guidance' should be linked "solely" to inflation expectations.
"In my opinion, based on the current data, it is much too early for a huge package."