MNI EXCLUSIVE: Future ECB VP Remains Elusive On MonPol Stance

--De Guindos Answers In Document Seen By MNI, Avoids Personal View On MonPol

by Jean Comte

     BRUSSELS (MNI) - With only few months to go before his likely start date as

the next European Central Bank Vice-President, Luis De Guindos remains elusive

on his monetary policy stance, MNI has learned.

     In a written response to a questionnaire drafted by members of the EU

Parliament, seen by MNI, Spain's current economic affairs minister sticks

carefully to a purely descriptive stance, avoiding any kind of personal

judgement regarding the ECB's accommodative monetary policy, the end of Asset

Purchase Program (APP) and the Corporate Sector Purchase Programme (CSPP).

     "The ECB is expected to maintain its current monetary policy stance, until

underlying inflation pressures build up and sufficient signs of a sustained

adjustment in inflation are observed," he wrote on monetary policy. "Therefore,

the ECB should stand ready to adjust its stance as necessary in order to fulfil

its mandate."

     --QUOTES ECB LINE

     Noting the ongoing economic recovery and the impact on prices, de Guindos

said "this has yet to translate into a sustained pick up in the medium-term

inflation outlook, which remains subdued."

     Referring to the official ECB communication, he added that "the process of

monetary policy normalization will need to satisfy two core premises. First, it

will have to be predictable and transparent, in order to ensure a smooth

communication with market participants. Second, it will have to be gradual and

commensurate with the prevailing inflation outlook."

     Asked about the appropriate time horizon for ending APP, he answered that

the ECB should look to return gradually to a more conventional policy,

immediately adding that "it is difficult to set a specific timing for the end of

this programme".

     The end of APP was again under the spotlight last week, as the accounts of

the last Governing council meeting, published Thursday, revealed disagreements

regarding the wording around the end of the program -- which will last at least

until September and could be increased or prolonged, if needed.

     De Guindos also praised the CSPP, but did not make any mention of a

possible end of decrease of the program. "In my view, the CSPP has been quite

successful in improving access to funding by companies, not only directly for

the large corporations whose bonds are typically eligible for purchases under

the CSPP, but also indirectly across all firms and other market segments," he

wrote. 

     --ECB VIGILANCE

     "Having said this, the ECB will have to remain vigilant regarding a

potential build-up of imbalances and risks in certain segments of the corporate

debt market as a result of very loose financial conditions," he added.

     The written answers will be used by members of the European Parliament as a

basis to conduct a hearing of De Guindos, scheduled this afternoon.

     As reported by MNI last week, the hearing will be followed by the vote in

the European Parliament, before they issue a 'non-binding' Tuesday. The

executive board of the ECB will also give an opinion on March 8, before the

official confirmation of the new VP's nomination by Euro area heads of

government at their Mar 22/23 summit.

     De Guindos is expected to start his new position on 1st June 2018,

following the end of incumbent Vitor Constancio's mandate in May 2018.

--MNI London Bureau; tel: +44 203-586-2225; email: les.commons@marketnews.com

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