MNI BRIEF: BLS Better Than r* To See Restrictiveness -Guindos
MNI (LONDON) - The European Central Bank’s Bank Lending Survey “provides a much better indicator of the restrictiveness” of monetary policy than other more academic concepts like the neutral rate, ECB vice president Luis de Guindos said in an interview with Hospodarske Noviny on Wednesday
“Using it [neutral rate] as a reference for monetary policy decisions is not the right approach”, Guindos said, noting that the great level of uncertainty calls for a “more pragmatic approach, placing less weight on unobservable variables or model-based estimates with shortcomings and results expressed in wide ranges”.
He expects an increase in euro area headline inflation over the next couple months due to base effects in energy prices. He also said that ECB analysis on tariffs suggest that the main impact will be on growth while the impact on inflation is more difficult to assess “owing to the dampening effect of tariffs on demand and growth, as well as the fact that selective tariffs can lead to trade being redirected and diverted.” (see MNI SOURCES: ECB Likely To Tweak Language, Keep "Restrictive" )