Makhlouf Sees No Evidence Just Yet for ECB to Boost Stimulus

(Bloomberg) -- There’s currently no reason for the European Central Bank to add monetary stimulus, though the outlook could change by the time officials meet in two weeks, according to Irish policy maker Gabriel Makhlouf.

“We have to remain absolutely vigilant,” Makhlouf said in a Bloomberg TV interview with Anna Edwards and Matt Miller. “Right now in terms of monetary policy, I don’t think there is -- one month on from our previous projections -- there is new evidence to make us change our minds.”

The ECB is heading into its Oct. 29 meeting against the backdrop of surging virus infections that have forced euro-area government to impose new restrictions on travel and business. Some officials including President Christine Lagarde have already warned that the curbs could hurt the economic recovery, yet policy makers also see strong reasons not to rush into expanding support.

Economists expect the ECB to top up its 1.35 trillion-euro ($1.6 trillion) emergency purchase program before the end of year. December is the most likely month for a decision, partly because the Governing Council will receive new growth and inflation forecasts and have more time to evaluate the economic damage.

Finnish central banker Olli Rehn reinforced those expectations in an interview with Reuters published Friday. Some disappointing data recently have amplified the downside risks to the recovery, he said.

At the same time, he noted that the ECB’s updated projections will come with a first view of 2023, “so we’ll have to see how the inflation and the growth outlook will evolve.”

Some of the uncertainty complicating a proper assessment of the economy right now might dissipate by December. U.S. elections will take place early next month, a Brexit deal might be reached, and the dispute around Europe’s 750 billion-euro fiscal stimulus package might be resolved.

While Italian central banker Ignazio Visco -- speaking to Bloomberg TV’s Francine Lacqua on Friday -- pointed to some third-quarter data that have been better than anticipated, he also warned that “the stop and goes are going to be there” in the coming months, with effects that “may be worse than expected.”

Visco cautioned against a premature withdrawal of stimulus. “This means that policies have to remain extremely accommodative on the fiscal side as well as on the monetary side as we are prepared to do for the euro area at large.”

In some countries, the economic impact of a new spike in infections can already be felt. France’s statistics office predicted output will probably stall in the final quarter of the year -- even before President Emmanuel Macron announced a curfew and other curbs this week. Germany’s recovery has also lost some of earlier momentum.

“We live in extraordinary circumstances, the degree of uncertainty that we’re in right now is probably unknown,” Makhlouf said, adding that there’s always a risk of a double dip recession. “Nothing is off the table.”

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