MNI POLICY: ECB Will Restart QE If Necessary - Olli Rehn

By Luke Heighton

     FRANKFURT (MNI) - The European Central Bank stands ready to relaunch its

asset purchase programme "should economic developments so require," Bank of

Finland chief Olli Rehn said Tuesday.

     "In case of a further weakening of economic activity and a materialisation

of adverse contingencies ... [the ECB may] strengthen its forward guidance and

its linkage to the achievement of the price stability objective, lower the

monetary policy rates and introduce possible mitigating measures, and/or

re-launch net purchases under the securities purchase programme," Rehn told a

press conference in Helsinki. 

     Rehn, a contender to replace Mario Draghi as ECB President when the Italian

steps down in October, said the Governing Council's decision to extend forward

guidance into the second half of 2020, responded to both a slowing economy and

rising risks.

     "The global economy and global politics are surrounded by protracted

uncertainty, reflecting, in particular, the expanded and heightened trade war in

particular between the United States and China. This trade war is unlikely to

subside any time soon, due to the underlying struggle between the two countries

over technological and economic supremacy.

     "Secondly, economic activity in the euro area has slowed and market

inflation expectations have come down slightly compared with projections in the

early part of the year. Inflation expectations have remained at low levels,

which will hamper achievement of the ECB's price stability objective of below

but close to 2%. For the achievement of the ECB's medium-term price stability

objective, inflation in the euro area may fluctuate around 2% in the short

term."

     Rehn said the monetary decisions taken at last Thursday's Governing Council

meeting in Vilnius "ensure that financial conditions will remain very

favourable, supporting euro area growth, while TLTRO-III will help "increase

domestic price pressures in the euro area and thereby to support the development

of inflation in the medium term."

     In a Tweet posted June 7 Rehn wrote: "Gotta do what's gotta do, as needed.

Resuming #QE & going for lower and/or longer in the toolbox. Potential reasons:

prolonged uncertainty due to increased protectionism and/or inflation

expectations stay anchored too low."

--MNI Frankfurt Bureau; +49-69-720-146; email: luke.heighton@marketnews.com

--MNI London Bureau; +44 203 865 3829; email: jason.webb@marketnews.com

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