BUSINESS

Mersch says Draghi comments reflect Trichet’s 'strong vigilance’

The European Central Bank has indicated that it is close to easing monetary policy in June, according to Executive Board member Yves Mersch.

ECB President Mario Draghi’s comment on May 8 that officials are “comfortable” with taking action next month is similar to the policy signals given by his predecessor, Jean- Claude Trichet, Mersch said at an event in Berlin.

“Draghi only said, in his own way, what Mr. Trichet used to say with ‘strong vigilance’,” Mersch said. “We never precommit unconditionally, but there is a row of possibilities.”

Trichet, who headed the Frankfurt-based ECB from 2003 to 2011, typically used the phrase “strong vigilance” to signal interest-rate increases a month in advance. He didn’t deploy the language before a rate cut.

Draghi is trying to revive inflation to entrench an economic recovery after a recession and debt crisis that almost splintered the currency bloc. While he kept rates at a record low last week, he said officials are “dissatisfied” with the outlook for price growth and said policies from a cut in the benchmark interest rate to a negative deposit rate and liquidity injections are all options.

“What exactly will happen, that’s a decision that we will take at the next council meeting,” Mersch said on Wednesday. The 24- member Governing Council gathers in Frankfurt to set monetary policy on June 5. [Bloomberg]

Online