The European Central Bank (ECB) policymaker Francois Villeroy de Galhau crossed the wires, via Bloomberg, while speaking in an interview with French magazine L’Agefi. The news report says that the ECB policymaker signaled skepticism over the need for renewed asset purchases while leaving open the question of whether he’d still back a stimulus package that includes them.
It was further mentioned in the story that the central-bank member said the ECB doesn’t have to use all the instruments in its toolbox at the same time, entering an already divided debate within the Governing Council before next week’s policy meeting.
Key quotes (Source: Bloomberg)
“In the current context, the aim of any new cut in the deposit rate would be to avoid a tightening of financial conditions for economic actors.”
“The Governing Council estimated in July that this tightening risk mainly concerned the short-term part of the yield curve.”
“Monetary policy needs to maintain its full support, and be ready to strengthen it.”
“The priority today is to better anchor inflation expectations to our target: that should be tackled by reinforced forward guidance.”
“Regarding a tiered system, the only limit — which technical discussions will shed light on — is that it shouldn’t affect the proper transmission of the central bank’s decisions to the short end of the market.”
FX implications
The Euro (EUR) showed little reaction to the news as major market attention is on the British political play surrounding Brexit while thin trading activity during the early Asian session also seems to be responsible for the lack of the momentum.
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