European Central Bank Executive Board member Benoit Coeure said record liquidity provision won’t lead to concerns of faster price increases.
“Inflation expectations have remained very well anchored following the non-standard liquidity provision measures undertaken by the ECB,” Coeure said in a speech in Frankfurt yesterday, according to a text provided by the ECB today. That “probably reflects continued negative output gaps in the euro area as well as confidence that the ECB will be able and willing to drain liquidity if and when necessary to control inflation.”
The ECB injected has more than 1 trillion euros ($1.25 trillion) into the banking system since December in a bid to ward off a looming credit crunch. The Frankfurt-based central bank cut its benchmark interest rate to a record low of 0.75 percent on July 5 as Europe’s debt crisis, now in its third year, worsened.
Still, the debt crisis “has not eroded trust in the euro as a currency,” Coeure said.
The euro rose after Coeure’s comments were published and was trading at $1.2542 at 10:57 a.m. in Frankfurt. The ECB will convene for its monthly rate-setting meeting in Frankfurt on Sept. 6.
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