April HICP in the Eurozone will be an important factor for a possible policy decision by the European Central Bank, ECB Vice President Vitor Constancio said Thursday.
Speaking to journalists following a panel appearance at the Brookings Institute, Constancio said this month’s inflation figure “will be important, yes, to have a view if indeed we have reached, on a more permanent basis, low levels or the March figure was just a blip. So we have to wait and see which is which.”
His own expectation, he said, is “that there will be an uptick” from March’s low 0.5%, although “it’s anybody’s guess” what the reading will be in April.
The next months are “an important consideration in terms of data,” he said, “because as you know, there are timing effects, base effects, and to have a better view on where inflation is right now, we have to take the average … and not just the figure for March. So that’s absolutely important.”
Asked about the preference for private versus sovereign assets in any QE program of the ECB, Constancio said, “We are considering everything, but no decision.”
He noted that various colleagues of his had publicly indicated already “that private assets will be included in any decision that may be taken. So that would make a slight difference with other policies in other central banks. And we are looking in what assets would be, say, easier to operate, if indeed we will take such a decision.”
As to options and timelines for possible non-standard moves by the ECB, Constancio replied, “I cannot really answer those questions with any precision because we have not taken any decision on the issue, as you know. So these are things that we have been analyzing, and in particular our experts – and that includes experts also from other national central banks – have been looking into and building up scenarios and so on, but no decision has been taken.”
He added: “But there was this statement recently that the Governing Council of the ECB was unanimous in its commitment to consider also unconventional monetary policies to address the concerns with the low-inflation regime. So we will see.”
During the panel, Constancio affirmed that had major central banks not pursued innovative policies after 2009, then “I think the world would be in a worse position” today.
“There is still a negative output gap in advanced economies and high unemployment, in particular in Europe,” he said. “The slack is still bigger in advanced economies than in emerging economies.”
“We would benefit very much from better global safety nets, mostly via the IMF, with real liquidity lines.”
He repeated the ECB’s view that 70% of the decline in euro area inflation was due to the effect of energy and processed food costs.
The exchange rate explains 0.5 point of the decline, he said.