Coeure Says ECB Not Reversing Course on Policy With New Package

(Bloomberg) -- The European Central Bank’s decision to offer new loans to banks and extend the period of record-low rates doesn’t mean officials are reversing course on policy, Executive Board member Benoit Coeure said.

In an interview with Italy’s Corriere della Sera newspaper, Coeure defended the decision taken on Thursday, saying policy makers were only reacting to a slowdown that came sooner than they expected, but wasn’t a surprise. Policy makers are not seeing signs of a recession “at present” and inflation will eventually reach their goal of just under 2 percent, but get there more slowly.

“We knew that euro-area growth would adjust towards its potential rate,” Coeure, who runs market operations at the ECB, said in the interview published Monday. “But those decisions don’t represent a turnaround in our policy; they have been carefully calibrated to this diagnosis.”

Coeure is joining other ECB officials in defending their latest monetary-policy action against criticism that it made a mistake by ending bond-buying program last year despite signs of weakening expansion in the 19-nation region. His Executive Board colleague Yves Mersch said on Friday the package was a preemptive move against downside risks to the economy that were mainly external and outside policy makers’ influence.

The Governing Council decided on Thursday it will offer banks fresh longer-term funding and keep interest rates at record low at least until the end of this year. It previously signaled an increase was possible as early as September.

Coeure said there was no need to restart its quantitative-easing program as the ECB was still seeing “robust economic growth, although it’s less strong than before,” while this instrument is now part of the ECB’s toolbox.

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