ECB's Nowotny: Market anxiety is overdone

Tuesday, 18. June 2019 12:28

Unlike in 2012 when there was real danger of a breakup in the Eurozone, there is no denomination risk and the monetary union is in "calmer waters," Ewald Nowotny told CNBC on Tuesday. Speaking in Sintra, Portugal, after European Central Bank President Mario Draghi vowed to fight against low inflation and hinted at easing measures, the member of its governing council reiterated "a variety of instruments" is still available. Asked about market volatility and record low inflation expectations, he claimed investors are "overreacting."

The rate-setter stressed there is more room than "normally seen" for bond purchases in spite of limitations imposed by the European Court of Justice limitations. He added the limits are "not absolute" and that they are "dependent on certain situations." The governor of Oesterreichische Nationalbank, Austria's central bank, expressed belief that the "interesting perspective" would be further discussed among policymakers.

Inflation is "very complex" and it can't be directed by a "mechanic" tool while low rates in the long term are the result of factors unrelated to the ECB, he asserted and pointed to the "fiscal challenge" for the next European Union administration. The deterioration in the market-based indicators regarding consumer prices is "overdone" and it should be "corrected in due time," Nowotny stated.

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