August 22, 2017 / 12:33 PM / a year ago

ECB policy may temporarily ease Europe's inequality

FRANKFURT (Reuters) - The European Central Bank’s ultra-easy monetary policy may actually reduce income inequality in Europe, ECB Vice President Vitor Constancio said on Tuesday, rejecting the argument that asset buys disproportionately benefit the wealthy.

European Central Bank (ECB) headquarters building is seen in Frankfurt, Germany July 20, 2017. REUTERS/Ralph Orlowski

Constancio said the ECB’s stimulus measures lower unemployment and thus increase disposable income for Europe’s poorest, compressing inequality, at least in the short term.

European Central Bank (ECB) Vice President Vitor Constancio is seen at a news conference at the ECB headquarters in Frankfurt, Germany July 20, 2017. REUTERS/Ralph Orlowski

“This result confirms that, from the distributional perspective, the main impact of expansionary monetary policies is on the reduction of unemployment with positive effects on the reduction of inequality,” Constancio said in Lisbon.

“(Monetary policy) measures can improve their welfare and contribute toward reducing income disparities, at least in the short-term.”

But he added that such steps are likely to be temporary with the “hollowing out of the middle class” and the increasing polarization of incomes likely continuing over the longer term.

Reporting by Balazs Koranyi; Editing by Robin Pomeroy

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