ECB Policymaker Praet States Central Bank Not Out of Ammunition

The European Central Bank’s interest rates have not hit their lower bound and fresh cuts are an option, policymaker Peter Praet said, stressing the ECB’s “easing bias” after chief Mario Draghi left markets puzzled last week.

Praet, who holds the influential economics portfolio on the ECB’s Executive Board, wrote in a column for policy research portal Vox that the ECB has “not run out of ammunition”.

His comments underpinned demand for most euro zone bonds, highlighting the readiness of at least some ECB policymakers to consider a fresh cut in interest rates as weak lending data offsets promising euro zone economic reports.

The Belgian generally leans towards the ECB’s dovish camp.

Draghi was guarded last Thursday when pressed on whether ECB policymakers discussed a cut at their monthly meeting, saying they only discussed forward guidance and were unanimous on that, although he noted rates had not reached the zero bound.

Praet, while stressing that “our forward guidance does not promise irresponsibility”, made clear that the euro zone’s central bank had further scope to act.

“Against the conditions that we see prevailing over a meaningful horizon, our guidance includes an easing bias,” he wrote in the Vox column, dated August 6.

via Reuters

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Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He has been published by The MarketWatch, Reuters, the Wall Street Journal and The Globe and Mail, and he also appears regularly as a guest commentator on networks including Bloomberg and BNN. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza