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ECB’s De Cos Says All Stimulus Options Should Remain on Table

Jeannette Neumann

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The European Central Bank should keep all options on the table to reinvigorate inflation and growth, including a relaunch of bond purchases, Bank of Spain Governor Pablo Hernandez de Cos said.

His comments come less than two weeks before he and fellow members of the ECB Governing Council meet in Frankfurt to set the course for monetary policy in the euro area. The region’s economy is confronting the triple threat of a near recession in its biggest economy Germany, the rising possibility of a no-deal Brexit and intensifying trade tensions.

Despite such headwinds to economic growth, three of Hernandez de Cos’s ECB colleagues have said in recent days that the situation hasn’t deteriorated enough to justify a new round of bond purchases.

Hernandez de Cos pushed back against those hawkish views, saying record-low rates and other measures put in place during the past several years have lowered financing costs, and shouldn’t be ruled out ahead of the September meeting. ECB President Mario Draghi has tasked staff to review all options for policy makers to assess.

“It’s important that this complementary nature be maintained with new measures, should they be necessary, to maximize their effectiveness,” Hernandez de Cos said Saturday in a speech in the northern Spanish region of Asturias.

Risks to growth in the euro-area economy remain “clearly to the downside.”

The Spanish central banker acknowledged, however, that the longer rates remain at levels close to their effective lower bound, the more difficult it becomes to cut them even further in response to future crises. That forces more reliance on unconventional measures such as expanding balance sheets.

Hernandez de Cos called on the ECB to review its monetary policy strategy, including a reconsideration of its price target given the struggles to generate sustainable inflation, in line with a push by Finnish central bank chief Olli Rehn.

To contact the reporter on this story: Jeannette Neumann in Madrid at jneumann25@bloomberg.net

To contact the editors responsible for this story: Fergal O'Brien at fobrien@bloomberg.net, Zoe Schneeweiss

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