MNI BRIEF: Europe Faces Bumpy Ride To New Normality - NCB Govs

Europe faces a "bumpy" exit from Covid pandemic-related monetary and fiscal policy measures, an EZ National Bank Governor said during a panel discussion Friday, with many "tough choices" ahead. Euro area inflation is likely to return to the ECB's 2% target earlier than central bankers thought six months ago, BNB head Pierre Wunsch added. Policymakers should remain patient, but also do more to communicate their believe that interest rates will converge durably towards their aim.

Slovak central bank boss Peter Kazimir echoed that call, adding that a degree of flexibility will be necessary to facilitate a smoother transition to the new, post-Covid economic normality. The coronavirus pandemic highlighted the potential for positive interactions between fiscal and monetary policy, Bostjan Vasle of the Central Bank of Slovenia said, but there remains scope for improving the quality of fiscal spending.

All three central bankers reiterated the importance of considering climate change in ECB policy, but said the Bank should only act within the limits of its mandate, while remaining "realistic" about what it can achieve.