De Guindos: ECB wiser on dangers of easy money

The European Central Bank (ECB) will take a more cautious approach to monetary stimulus tools such as quantitative easing (QE), following lessons learnt from the past decade of ultra-loose policy, Vice-President Luis de Guindos told Reuters.

Speaking ahead of the ECB’s upcoming strategy review, de Guindos said while instruments like QE and negative interest rates will remain available, the central bank is now more aware of their side effects, including financial market distortions and stability risks.

“We have learned much more about side effects, and we are going to pay more attention to financial stability considerations,” he said, noting that deploying such tools can be easier than withdrawing them.

The ECB launched around €5 trillion in QE over the past decade to combat sluggish inflation, but the unwinding of those policies has triggered volatility, particularly in highly indebted countries like Italy. De Guindos said the ECB’s new strategy will reflect the shift to an era of faster inflation and disrupted global trade, but “big surprises” are not expected.

Meanwhile, ECB officials are divided over whether the updated strategy should include self-criticism, though internal analysis suggests QE and negative rates were broadly effective. The conclusions of the review are expected this summer.

Attribution: Amwal Al Ghad English
Subediting: M. S. Salama

Leave a comment