ECB committed to keeping interest rates low: Villeroy

January 25, 2019

PARIS (Reuters) – The European Central Bank is committed to keeping interest rates low as it winds down its monetary stimulus and could consider offering credit to banks, ECB policymaker Francois Villeroy de Galhau said on Friday.

The ECB ended its 2.6 trillion euro ($3 trillion) crisis-era asset purchase scheme last month, but has said it will keep interest rates at record lows at least through the summer to support the euro zone economy and inflation.

However, slowing growth across the region has raised questions about whether the ECB will be able to raise interest rates later this year for the first time in a decade.

“We remain committed to maintaining interest rates very low, which is good for the economy,” Villeroy told France 2 television from the World Economic Forum in Davos, Switzerland.

“Progressively we are withdrawing monetary stimulus… but it is very progressive and depends on improvement in the economy. We’ll take the time it takes,” said Villeroy, who is also governor of the Bank of France.

ECB President Mario Draghi acknowledged on Thursday that risks to the region’s growth were tilted to the downside.

With the ECB already owning a quarter of the euro zone’s outstanding governing debt, some analysts expect it to turn to other instruments to keep credit flowing, such as a new round of cheap multi-year loans to banks, known as Targeted Long-Term Refinancing Operations (TLTRO).

“We could consider the provision liquidity and credit to banks, it’s part of our toolbox,” Villeroy said later in an interview with Bloomberg TV.

With TLTROs seen by many economists as benefiting mainly Italian banks, Villeroy added that the move “cannot be designed for specific banks or jurisdictions”.

(Reporting by Leigh Thomas; editing by Richard Lough)