BoG governor says ECB has to remain vigilant about price stability, sees bullish exports

FRANKFURT – European Central Bank Governing Council member Nicholas Garganas does not expect the ECB to give any new signals about monetary policy soon, he said in an interview yesterday. «The Governing Council has underlined the risks and the need to be vigilant. (But) I don’t think there will be any signals about monetary policy in the next few weeks other than the need to maintain vigilance about price stability,» he was quoted as saying in an interview with news agency AFX. Garganas, who is also governor of the Bank of Greece, added that he expects inflation to fall below the ECB’s 2 percent threshold in the second or third quarter of 2005, pushing aside concerns that excess liquidity might sustain inflation. «It’s always been a concern… but it’s for the future not for now.» «Interest rates are at historically low levels but… they will not remain there forever. I don’t think that the current interest rate is neutral,» Garganas said. Garganas’s comments are in line with recent statements by other ECB policymakers. The ECB has kept its benchmark interest rate at a record-low 2 percent for 20 months straight, and most private sector economists do not expect a rate rise before late 2005. Garganas stood by the ECB’s December mid-point forecast of 1.9 percent growth in eurozone gross domestic product in 2005 despite a shock drop in fourth-quarter German output. «At this point the most likely scenario is the projection made in December. Downside risks remain, however, and I cannot rule out somewhat slower growth in 2005,» Garganas said. «Exports are expected to remain bullish despite the euro appreciation. Strong buoyancy of world demand is the main factor underlying this expectation.»

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