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ECB's Coeure Says Governing Council Must Clarify Pace Of Stimulus Removal


The Governing Council must clarify the pace at which it plans to start raising interest rates when the time comes, European Central Bank Executive Board member Benoit Coeure said Monday.

"Empirical evidence demonstrates that the enhanced forward guidance that the Governing Council adopted in June 2018 has been effective in reducing uncertainty around the expected future path of short-term interest rates," Coeure said.

"Looking ahead, should economic conditions warrant, there might be a case for the Governing Council to go beyond the timing to lift-off in further clarifying the pace at which it expects to remove policy accommodation," he added.

The policymaker also noted that the risks of publishing a precise numerical forecast of the future path of policy rates are likely to outweigh the benefits.

Further, Coeure pointed out that empirical evidence suggests public tends to pay more attention to policy signals in unusual economic circumstances than during normal times.

Hence, "a further clarification of our reaction function might help market participants and the broader public to better anticipate the likely future path of short-term interest rates," he said.

On September 13, the ECB left its interest rates, asset purchases and forward guidance unchanged.

The main refi rate is currently at a record low zero percent and the deposit rate at -0.40 percent. The marginal lending facility rate is 0.25 percent.

"The Governing Council expects the key ECB interest rates to remain at their present levels at least through the summer of 2019, and in any case for as long as necessary to ensure the continued sustained convergence of inflation to levels that are below, but close to, 2 percent over the medium term," the ECB said in a statement.

The bank confirmed that the asset purchases will be halved to EUR 15 billion this month and plan to wind them down at the end of this year "subject to incoming data confirming our medium-term inflation outlook."

Economists widely expect the bank to hike interest rates only in the second half of next year.

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