European Central Bank Executive Board member Yves Mersch said Monday that the chances of further easing measures at June’s monetary policy meeting have risen substantially.
In a speech text prepared for delivery at the BayernLB Fixed Income Conference in Munich, Mersch said that the Governing Council stands ready to use both standard and non-standard policy tools to counter risks of weak price pressures.
“The chances that the Governing Council will act already at its next monetary policy meeting in June have risen substantially,” Mersch asserted.
“The ECB Governing Council agrees to use both non-standard measures as well as conventional monetary policy instruments to effectively counter risks of very low inflation over a too long period,” he added.
While laying out the destructive effects of deflation, Mersch said that currently the ECB sees no signs of any downward spiral of prices.
“Long-term inflation expectations are solidly anchored and there are no signs that consumers are delaying purchases. On the contrary, consumer sentiment has last hit the highest level since seven years,” he said.
“Nevertheless: we must be prepared for residual risks of deflation,” Mersch cautioned. “But we are also sensitive to very low inflation for a too long period. Above all this bears the risk that long-term inflation expectations could become unanchored.”
In an interview with German weekly Die Zeit published on May 15, fellow ECB Executive Board member Peter Praet said that “negative interest rates on deposits are a possible part of a package of measures.”