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Free AccessMNI INTERVIEW: Slowdown May Persist, Says ECB's Hansson
--Trade Disputes, Doubts Over Fiscal Policy To Weigh On Eurozone
--May Be Too Early For ECB Monetary Policy Review
--TLTRO Terms May Not Be Announced In June
By Luke Heighton
FRANKFURT(MNI) - Uncertainty caused by international trade disputes and
poor fiscal policy may mean the eurozone's economic slowdown continues into the
medium term, the governor of the Central Bank of Estonia told MNI, as he ruled
himself out of the race to succeed European Central Bank President Mario Draghi.
"The jury is still out on whether the short-term softness will spill over
into the medium term, Ardo Hansson said in an interview in Frankfurt on March
21.
"From the perspective of an investor, if you see a bit of uncertainty for a
month or even a few quarters you can handle it, but when you start seeing in so
many jurisdictions so many bad policies or protectionism, demonstrations or what
have you, it starts to undermine confidence.
"In some countries domestic politics is creating uncertainty about future
economic policy, and that must weigh on investors, and maybe even on consumers.
The economy isn't made of rubber and perfectly resilient to any kind of abuse.
The message has to be that if you have unsound policies in many places then it
has to have an impact. Hopefully it will be a short-term impact, but we'll see."
Hansson, who steps down as head of Eesti Pank when his term ends on June 6,
said it was "legitimate" to ask whether confidence in the ECB's ability to alter
inflation had been eroded, and that "holding on to the 2% target forever isn't
necessary". But, he added, "shifting around a lot isn't helpful. It's hard to
say what the new normal is going to be."
Hansson said he was not opposed to calls for a systematic review of ECB
monetary policy strategy, though he queried the need to do so now. "One argument
would be to first complete the current cycle and return to normal and then once
you're back on track with your existing framework then you review. I think that
over time you should occasionally take a fresh perspective, but the timing might
be a bit early."
--TLTROS
The ECB's March decision to announce a third round of targeted longer-term
refinancing operations to begin in September was, in his opinion, more "a
backstop" aimed at preserving monetary transmission than a change to the policy
stance, allied to a desire to avoid the "bunching up" of banks TLTRO-II
repayments "and other funding arrangements clustered around the same moment."
He also cautioned against assuming that the loans' exact terms, which he
expected to be "a bit less generous" than previously, will be announced in June.
"I don't know what's likely, but obviously we have to announce the precise terms
somewhat in advance of when the programme starts," he said.
"We could get a lot of news in-between, so for us to now lock in every
detail in March wouldn't make any sense."
Asked whether he would like to take over from ECB Mario Draghi when he
steps down later this year, Hansson replied: "It's not by any means my preferred
option. I have kids who I'd like to keep where they are right now. If I were in
a different personal situation then I might answer differently, but I don't see
it as something I want to do terribly much."
--MNI London Bureau; +44 203 865 3829; email: jason.webb@marketnews.com
[TOPICS: M$E$$$,M$X$$$,MT$$$$,MX$$$$,M$$EC$]
To read the full story
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Please enter your details below.
Why MNI
MNI is the leading provider
of intelligence and analysis on the Global Fixed Income, Foreign Exchange and Energy markets. We use an innovative combination of real-time analysis, deep fundamental research and journalism to provide unique and actionable insights for traders and investors. Our "All signal, no noise" approach drives an intelligence service that is succinct and timely, which is highly regarded by our time constrained client base.Our Head Office is in London with offices in Chicago, Washington and Beijing, as well as an on the ground presence in other major financial centres across the world.