The European Central Bank board member Benoit Coeure said on Wednesday that the bank is ready to do what is necessary to keep the inflation levels near but below the 2% target.
“Looking ahead, the Governing Council is determined to act in case of adverse contingencies and also stands ready to adjust all of its instruments, as appropriate, to ensure that inflation continues to move toward the Governing Council’s inflation aim in a sustained manner,” he said.
Coeure also commented that the Eurozone is showing signs of weaker growth in the current and the next quarter. This weakness is mostly caused by global uncertainty that is currently hurting the manufacturing sector.
The Eurozone grew up 0.4% (quarterly) during the first three months of the year.
When asked about the EU banking union, Coeure highlighted that it needs to be completed and that should include a European deposit insurance scheme (better known as EDIS).
“The ECB has proposed that EDIS could be accompanied by risk-based contributions by banks linked to their sovereign holdings,” he said, adding that the Brexit makes necessary to improve and integrate the European capital markets.
The European Union inflation levels are currently persistently low. Some analysts attribute this to oil prices, who have been falling due to an excess of supply in the market. Other factors, like lower wages and sluggish investment, are behind this phenomenon. The ECB aims to maintain prices stable, which means keeping the inflation level right below its target, which is currently at 2%.
The Eurozone inflation was recently revised up to 1.3%, which is still too low for the ECB. Inflation was registered at 1.2% in May, the lowest since April 2018.
The European Central Bank Governing council is expected to meet next week to discuss monetary policy. It's still not clear what the bank would do after Coeure's declaration, as they decided to stop with rate hikes for at least a year.