In a Financial Times interview, ECB Executive Board member Benoit Coeure said the Eurozone economy is not performing too badly for now, as supported by services and construction. However, signals from the financial markets, in particular from bonds, were “quite alarming”.
He added ECB have different tools to use if outlook worsened. If cutting interest rates is the beat option, ECB would have to “consider the impact of negative rates on financial intermediation, especially for banks”. In that case, policymakers “would have to consider whether a tiering system is needed.” But he also emphasized that “today the prevailing view in the Governing Council is that it is not, but we also agree that it deserves further reflection.”
On reviewing ECB’s inflation target, Coeure said “we have more urgent issues to face right now, but I’m pretty sure that we’ll do it at some point nevertheless.”
