ECB's Villeroy: Only a big downside risk to inflation could trigger radical policy rethink
PARIS (Reuters) - Only a major downside risk to inflation could prompt central banks to consider more radical monetary stimulus steps that some people are floating as a response to the coronavirus crisis, ECB policymaker Francois Villeroy de Galhau said on Wednesday.
Villeroy, who is also head of the French central bank, said weak demand would keep inflation durably below the ECB's 2% target, which would require interest rates to be kept low and liquidity abundant.
However, some economists are calling for even more extreme measures, such as cash handouts to households, while former ECB chief Mario Draghi has called for corporate debt cancellations.
In an opinion piece in France's Le Monde newspaper, Villeroy said such suggestions were "highly speculative" and would be difficult to put in place.
"According to these theories, central banks could for example create money that would directly finance companies," he wrote.
"Nothing is in principle excluded in an intellectual debate, but only a major 'downside' risk to price stability could allow such theories to be envisaged," he added.
(Reporting by Leigh Thomas)
