ECB's Coeure: We shouldn't run economy hot

Economy | Politics | Markets | Forex - Interest Rates 5/19/2017, 3:18 PM
ECB's Coeure: We shouldn't run economy hot

The European Central Bank adapts or, rather, eases policy over a longer period to stabilize prices growth with the aim to reach the target of slightly below 2% and not to counter "subtle type of hysteresis," said Benoit Coeure, board member of the top monetary authority of the euro area. In a speech in Geneva on Friday, the rate-setter claimed subdued demand hasn't led to such a phenomenon, a buildup of unemployment as a structural factor, and that it resulted in just "scratches, not scars" on a chronic basis.

"Unlike in the US, allowing inflation to overshoot our price stability definition for the sole purpose of bringing more people back into employment would not be consistent with our primary mandate," he said and stressed policymakers shouldn't "run the economy hot" to prevent long-term joblessness from becoming structural. In Coeure's view, discouraged individuals are returning to work only to an extent as the labor market strengthens in the world's largest economy, while in the Eurozone the participation rate has continued to rise.

"Since the adoption of the ECB’s credit-easing package in June 2014, around five million jobs have been created in the euro area. Model-based evidence indicates that our policy has contributed meaningfully to this increase: the current recovery has, by and large, been driven by monetary policy, with additional temporary support from the fall in oil prices," the central banker said and expressed belief the weakening in downside risks bolsters job creation.

TeleTrader Newsroom / IT

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