wrapper

ECB's Coeure Says MonPol Cannot Run The Economy Hot Against Labor Market Risks

The European Central Bank may be forced to tighten policy once inflation is perceived to be on a self-sustaining path despite high unemployment, ECB Executive Board member Benoit Coeure said Friday.

"Monetary policy cannot "run the economy hot" as insurance against labor market risks - that is, the risk that long-term unemployment becomes structural unemployment," Coeure said in a speech in Geneva, Switzerland.

"This would be neither desirable in view of our primary mandate, nor efficient given the euro area circumstances."

The policymaker expressed confidence that the ECB's ultra-loose monetary policy will have the desired impact, meaning bringing inflation to its target of 'below, but close to 2 percent' on a sustainable basis.

Coeure pointed out that the share of full-time employment in the recent labor market recovery has declined. Of the net employment created since the 2007-08 financial crisis, around a third has been for workers on temporary contracts, and around a quarter part-time, he added, citing official data.

Consequently, the pressure on wage inflation is less and explains why core inflation is failing to pick up momentum, the policymaker said.

"All this essentially means that it may take longer for inflation to gain steam and wage pressure might only start to rise meaningfully once adjustments in the "intensive margin" take hold - that is, once those who want to work more hours also succeed in doing so and once those who are still willing to work, but not currently counted as unemployed, are reabsorbed," Coeure said.

The rate-setter also said that the labor market slack may be larger than estimated and has "an important bearing" on the ECB's policy stance.

"Were we to ignore the facts...that labor market slack may be larger than is suggested by headline unemployment measures, we could run the risk of tightening policy prematurely," he warned.

by RTT Staff Writer

For comments and feedback: This email address is being protected from spambots. You need JavaScript enabled to view it.

Economic News

What parts of the world are seeing the best (and worst) economic performances lately? Click here to check out our Econ Scorecard and find out! See up-to-the-moment rankings for the best and worst performers in GDP, unemployment rate, inflation and much more.

0
Malaysia's GDP Growth To Gain Further Momentum: Ca...
Eurozone Consumer Confidence Highest In Nearly A D...
 

Guest Blogs

About Us

Forex Forum Asia is the premier Asian-based forum on retail foreign exchange (Forex) trading. The community has more than 11,000 members from Asia. The website serves its special interest network including media partnerships with event organizers, online discussion forums, social network, copy trading, provide economic report data, trading blogs and broker informational data. We strive to connect our members with services and brands that are useful and relevant.

english simplified chinese german japanese indonesian arabic filipino
french italian korean russian malay spanish thai

Recent Registered Users

Subscribe to our updates!

  • Stay up-to-date with forexforum.asia
  • Receive invite to participating local and overseas events
  • Receive promotions from our participating partners
  • Opt-in or opt-out anytime, you decide
captcha 

Hey there, before you go....

Download our app for easier access

Note: iTunes app is coming soon.