Sustained monetary stimulus by the European Central Bank reduces the risk of adverse externalities in the global financial system. This opinion was expressed by a Board member and Bank chief economist Peter Praet.
“Domestic monetary policy necessarily entails international implications,” said Praet during his speech in Beijing.
However, the politician said that monetary policy aimed at domestic price stability, generally supports financial stability. “In the current situation, for example, the continuation of monetary regulation, the ECB not only supports the return of inflation to the target level, but also helps to improve the balance of payments of the Euro area and reduces the risk of adverse spillovers for financial systems in other economies,” he said.
Praet also warned that excessive commitment to the goal of price stability may lead to conflicts between price stability and financial stability. “If the major Central banks will not adequately consider this risk in its strategy of monetary policy, this could lead to the creation of new or strengthening of existing financial problems at the global level,” he added.