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ECB will implement stimulus package but review welcome: French central bank chief
[NEW YORK] The European Central Bank (ECB) will implement its September stimulus package in full despite a rare public disagreement, but a broader review of the bank's policy framework is welcome, French central bank chief Francois Villeroy de Galhau said on Wednesday.
The ECB cut rates deeper into negative territory last month and agreed to restart bond purchases, a divisive move that was opposed by more than a third of the rate-setting Governing Council, an unusually high level of dissent for a normally collegial body.
"Have no doubt: We are committed, and the whole package will be implemented," Mr Villeroy, who also opposed the asset purchases, told a university lecture. "It is time to turn the page, and turn to the future."
Several Governing Council members, including the central bank chiefs of Germany, Austria and the Netherlands, openly criticised the decision in recent weeks, stirring an unusual debate and raising some doubts in markets about the ECB's determination.
With ECB chief Mario Draghi leaving office at the end of the month, incoming ECB president Christine Lagarde already promised a review of the bank's policy framework, and Mr Villeroy said that such a move would be "very welcome".
As part of this review, the ECB should clarify the symmetric nature of its inflation target to emphasise that any overshoot would be treated with the same vigour as an undershoot.
"There could be interpretations from ECB watchers saying that you had an implicit ceiling," said Mr Villeroy, who also sits on the Governing Council. "We corrected this bias but perhaps not strongly enough... we have to enhance the symmetry."
The ECB has undershot its target of almost 2 per cent since 2013, and its projections suggest it may not reach it for year to come, prompting some governors to argue for a complete rethink of the target itself.
Distancing himself from that debate, Mr Villeroy said that the ECB's problem is not the target level itself.
"I don't think that at this stage that our problem is the 'close to but below 2 per cent.' There is little ambiguity about the level," he said.