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ECB's Constancio watching more than just April inflation data
April 28, 2014 / 9:17 AM / in 4 years

ECB's Constancio watching more than just April inflation data

FRANKFURT (Reuters) - The European Central Bank’s vice president said on Monday that April’s inflation figures due later this week should not alone trigger a policy change because “it’s not just one or two numbers that matter”.

European Central Bank (ECB) Vice President Vitor Constancio looks on during the monthly ECB news conference in Frankfurt July 4, 2013. REUTERS/Ralph Orlowski

Euro zone inflation is running at 0.5 percent - far below the ECB’s medium-term target of just below 2 percent. The April data are due on Wednesday. A Reuters poll points to a reading of 0.8 percent.

But ECB Vice President Vitor Constancio told reporters in Frankfurt:

“I do not have any target in mind. It’s an important information but not the only aspect that can lead to any decision. What we need is a more fundamental view on a possible revised medium-term path for inflation. It’s not just one or two numbers that matter.”

Constancio’s comments appeared at odds with remarks last week from another member of the ECB’s policymaking Governing Council, Luc Coene, who said a lower-than-expected April reading could trigger policy action.

The ECB holds its next policy meeting on May 8, in Brussels.

Asked if the ECB had any policy tools ready to go, Constancio replied: “There are several tools available. As we’ve said before, we will act if we need to.”

Last week, ECB President Mario Draghi gave his clearest indication yet that the central bank could print money to buy assets if the outlook for inflation deteriorated, and identified a rise in the euro as a potential trigger for action.

Another heavyweight ECB policymaker, Christian Noyer, said in Paris on Monday that the euro’s current strength is a powerful deflationary factor and low inflation is likely to persist in the euro zone for some time.

“An increase in the exchange rate is equivalent to an unintended and unwanted tightening of monetary policy,” Noyer, who is also governor of the Bank of France, said in an annual letter to the French president.

At about $1.38 currently, the euro’s strength drives import prices lower and weighs on overall inflation.

Noyer’s comments echoed remarks on the exchange rate from Draghi, who last Thursday reiterated the ECB’s message that “the exchange rate is an increasingly important factor in our assessment of the outlook for price stability”.


Constancio listed several challenges facing the euro zone, including “a low inflation period that threatens to aggravate the burden of the debt overhang still besetting governments and private economic agents”.

He said the bloc also still faces major challenges in terms of lackluster growth, excessive unemployment and significant financial fragmentation - or uneven financial conditions.

The euro zone had made encouraging progress after facing the risk of break-up two years ago but this “does not mean we are entirely out of the danger zone”, the vice president said.

“We have certainly turned a corner and stabilized the situation,” he added. “(But)... it is too soon to declare that the crisis is over.”

Additional reporting by Leigh Thomas in Paris; Writing by Paul Carrel Editing by Jeremy Gaunt

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