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LONDON (MNI) - A review of the European Central Bank's monetary policy
framework is likely to start under the institution's next president, ECB
officials told MNI, although such an exercise may only take place if economic
conditions are relatively stable.
"It doesn't make sense to have that debate until Mario Draghi's successor
is in place," said one source. "It is going to have to take place at some stage,
but it is a long-term issue."
Another official stressed that if economic conditions deteriorated the
chances of a review, possibly including consideration of tools such as
price-level targeting, would be minimal.
"It hasn't been discussed up to now. Mario has always resisted such
attempts, wherever they came from. At a strategic level, that might be a
discussion for the new president, once in office, to start," the source said,
adding: "Only under more or less normal market conditions, and if monetary
policy is not under stress, would this be put on the table. Perhaps next year,
if the situation doesn't worsen more than what is forecasted at the moment, then
something like this could be started, but it would take at least six months, if
The call for a rethink of the ECB's framework, made by the Bank of
Finland's Oli Rehn, comes as the Federal Reserve embarks on a similar exercise
and as existing tools have failed for years to raise eurozone inflation towards
the central bank's target.
At his April press conference, President Draghi said in response to a
question from MNI that the ECB would have to see what came out of the Fed's
review and that any examination of the monetary policy framework would require
more than one or two meetings and could take several months. At a briefing in
Washington April 13, Draghi had said that changing an inflation target due to
failure to achieve it would undermine the ECB's credibility.
Some ECB officials had placed their hopes for higher inflation on a surge
in oil prices, but, when this came, it failed to feed through to CPI as much as
they had anticipated, the second official said.
Even the possibility of restarting quantitative easing, something which
officials acknowledge could be considered in a sharp downturn, may have limited
effect, only boosting GDP by 0.2% if used on a large scale, one source said.
Preliminary talks on a policy review could start within months, the third
official said, although another was more cautious. A review of the ECB's
monetary policy strategy "is something I would expect a new president to start,
or could start. But it definitely takes more time than Mario Draghi has left in
--MNI London Bureau; +44 203 865 3829; email: firstname.lastname@example.org