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MNI (London)
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:
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