MNI: ECB Constancio: Mandate Still Needs Very Accommodtve Bias

By Christian Vits

     FRANKFURT (MNI) - The Eurozone economy still needs generous support from

monetary policy due to current low inflation pressures, European Central Bank

Vice President Vitor Constancio said Wednesday.

     "Our price stability mandate continues to require maintaining a very

accommodative monetary policy stance which has been decisive for the economic

recovery and gradual normalisation of inflation," Constancio said at a

conference in Frankfurt.

     "Contrary to some alarmist views, euro area asset prices currently do not

point to signs of a general overvaluation in the euro area and certainly not of

credit-fuelled bubbles," he added.

     He admitted that there are specific market segments that require "close

monitoring" and said there is margin for contagion if a significant financial

price correction occurs worldwide.

     Constancio also stressed market risks. "Developments in the U.S. are not

irrelevant for the euro area: as seen in February, a sudden correction could, to

some extent, spill over to euro area markets." 

     The sharp movements that took place in the U.S. equity market in February

"demonstrated how sentiment can change very quickly - and market participants

should be well aware of this risk," he noted.

--MNI Frankfurt Bureau; +49 69 97782671; email: christian.vits@marketnews.com

[TOPICS: M$E$$$,M$X$$$,MC$$$$,M$$EC$]