Praet Says ECB Can Recalibrate Stimulus Again If Shocks Arise

The European Central Bank can boost the scale of its support to the euro-area economy yet further in the event that fresh risks to the outlook arise, Executive Board member Peter Praet said.

“If further adverse shocks were to materialize, our measures could be recalibrated once more, commensurate with the strength of the headwind, also taking into account possible side-effects,” Praet said according to the text of a speech delivered in Frankfurt on Thursday. Not including the impact of the March 2016 quantitative-easing boost, “relative to the counterfactual scenario, our measures have provided significant support to output and inflation,” he said.

Since the Frankfurt-based ECB last month cut rates to record lows and added corporate debt to the range of assets in its bond-buying program, Praet has repeatedly underlined that the central bank hasn’t run out of room to ease again. That pledge comes against a backdrop of increasing unease in financial markets over the use of negative interest rates and a dearth of evidence that too-low inflation is responding to stimulus.

Bloomberg

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