ECB’s Constancio favor gradual tightening despite bubble fears

FRANKFURT (Reuters) – The European Central Bank should withdraw its stimulus only gradually despite fears that it is helping fuel bubbles in property and financial markets, its vice president, Vitor Constancio, told Reuters on Wednesday.

The ECB has been has extended its bond-buying stimulus program into its fourth year, albeit at a reduced pace, even as growth in the euro zone is on its best run for a decade and many financial assets are at record highs.

Constancio acknowledged the risk for financial stability from overly ebullient markets, but reaffirmed his long-standing call for “gradualism” in policy tightening when asked.

“Yes because our mandate gives absolute priority to price stability and to create the economic and financing conditions for the normalization of inflation,” he said in response to a question about whether he stood by that view.

He was speaking after unveiling the ECB’s biannual Financial Stability Review, in which Frankfurt said risks to euro zone financial stability were contained even if vulnerabilities remained.

Constancio added that a market correction elsewhere in the world could affect Europe but would not necessarily warrant further stimulus from the ECB.

“Some correction of prices in asset markets would not be enough to derail the economic recovery,” he said.

“Other, deeper events could, so…we would then adjust according to what may happen.”

Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.