ECB’s Kazimir Favors Waiting to See If More Stimulus Needed

(Bloomberg) -- The European Central Bank should stay the course with its current monetary stimulus until it gets a better picture of how the euro-area economy is developing, according to Governing Council member Peter Kazimir.

Two weeks before the next policy meeting, the Slovak central banker said it makes no sense to take action based on second-quarter and July data because of its limited informational value. The most reasonable approach is to wait and see after the “timely” stimulus the ECB already deployed to underpin the recovery from the pandemic.

“We need to know what happened and is happening in July-September, including inflation developments,” Kazimir told reporters in Bratislava. “July numbers are not too revealing about the future.”

While the euro-area economy rebounded strongly at the start of the summer, a renewed rise in infections has cast doubt over the sustainability of the recovery. High-frequency indicators show activity in some countries sliding again.

That’s casting the spotlight on fiscal stimulus -- Germany extended a key jobs program late on Tuesday -- and on whether the ECB will need to expand its 1.35 trillion-euro ($1.6 trillion) bond-buying plan.

The account from the Governing Council’s July meeting published last week showed policy makers were reluctant to draw early conclusions on the rebound. Chief economist Philip Lane said the breadth and scale of the recovery remained uneven and partial.

Officials agreed they’ll be in a better position to assess the way forward at their meeting on Sept. 10, when updated forecasts will be released. Most economists predicted ahead of the July meeting that the ECB would increase pandemic purchases this year.

Executive Board member Isabel Schnabel didn’t address future policy action on Wednesday, focusing her remarks on negative interest rates instead. She argued the ECB hasn’t yet reached the limit on how far below zero it can go, while noting that side effects are likely to become more relevant over time.

Lane is due to speak at a virtual edition of the annual Jackson Hole symposium on Thursday.

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