September 13, 2019 / 8:06 AM / a month ago

Vasle says ECB could introduce new policy tools if needed: report

LJUBLJANA (Reuters) - The European Central Bank is ready to step up its use of monetary policy tools and introduce new ones if necessary, governing council member Bostjan Vasle was quoted as saying by Slovenian national news agency STA on Friday.

ECB chief Mario Draghi pledged indefinite stimulus on Thursday to revive an ailing euro zone economy. The bank cut rates deeper into negative territory and promised bond purchases with no end-date to push borrowing costs even lower.

Vasle told STA the ECB could increase volumes and change the conditions for bond purchases.

The ECB expects growth in economic activity and prices to remain low in the coming months, mainly due to slower international trade, Vasle, who is governor of the Bank of Slovenia, said in a statement later on Friday.

He said the new actions taken by the ECB aim to “replace the system where interest rates were determined for a certain period of time by a system where interest rates are determined in relation to the size of inflation”.

Vasle said the ECB’s action on Thursday aimed to influence not just short-term interest rates but also rates in the longer term.

Current risks include U.S. policy, China’s economic slowdown and Brexit and could lead to a further slowing in the euro zone and lower inflation, he said.

“Because of the changed economic conditions, a reaction of other economic policies is needed, particularly fiscal policy and not just monetary policy,” Vasle told STA.

“Actions of just one policy cannot change the flow of economic developments when considering the state we are in and the challenges ahead of us,” he added.

He said current concerns are focused on an economic slowdown in the euro zone, rather than a recession. The trade dispute between the United States and China had hit manufacturing and industrial sectors the hardest but the services sector was still yielding good results, he said.

Reporting by Marja Novak; Editing by Raissa Kasolowsky and Catherine Evans

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