The role of the European Central Bank (ECB) has been one of the keys so that the European countries have endured so far the effects of the crisis of the Coronavirus in their economies.
The institution chaired by Christine Lagarde has fiercely flexed the already lax monetary policy that was maintained in recent years and the head of the Bank of Spain, Paul Hernández de Cos, believes that “it would be desirable” that a part of that
Flexible policy was maintained beyond the pandemic.

“The main lesson that is derived from the PEPP program is that flexibility in the distribution of asset purchases has greatly increased not only effectiveness but also the efficiency of our asset purchases. Therefore, it would be desirable to discuss the possibility that our
Future purchasing programs Keep some of the Elements of PEPP flexibility, “he has secured in an interview with Bloomberg.

The emergency purchase program against the pandemic (PEPP) is one of the instruments that the ECB deployed since the beginning of the crisis to help the Member States of the Eurozone to weather the impact of economic paralysis
caused by the coronavirus.

It has not been its only instrument in recent months, but one of the most important when it comes to providing a support, a mattress, countries with more difficulty facing the invoice of the pandemic.

That invoice has translated into a vertiginous increase in debt, especially in countries such as Spain, which already started from high levels.
According to data from Eurostat, the indebtedness of our country scaled 95.5% of GDP to 125.2% in the year of the pandemic, until the first quarter of 2021 and only Greece (209.3%), Italy (160%
), Portugal (137.2%) and Cyprus (125.7%) exceeded the final balance.

The ECB, according to Hernández de Cos in the interview, will closely follow that evolution, among other parameters, to make any decision on the continuity or not of PEPP beyond March 2022 as expected.

The Governor of the Bank of Spain considers that it is “soon” so that the BOP Council of the ECB begins to discuss the future of PEPP, “in a context in which there is still a very high uncertainty, such as the current one, we must not anticipate
Premature way this discussion “.

Once the pandemic is finished, the ECB must define its monetary policy to ensure that the new inflation objective is achieved, which will require actions or others according to the macroeconomic context and, in particular, of the inflation prospects.

The new ECB strategy, according to Hernández de Cos, “makes it clear” that since the Governing Council of the Agency will consider, “as necessary,” new policy instruments to achieve its objective of price stability.

In his opinion, the ECB statement that a particularly energetic and persistent action is required to avoid generating a persistent low bias in inflation to negative disturbances is particularly important and the Forward Guidance must be recalibrated to adapt to the new strategy
.

According to highlights, the fact that it is signed that interest rates will not increase until the ECB observes that inflation is 2% “quite before the end of its projection horizon and durable in the rest of that horizon
“and that the observed progress of underlying inflation is sufficiently advanced to be compatible with a stabilization of inflation by 2% in the medium term, underlines the body’s commitment to maintaining a” persistently accommodated “monetary policy guidance to meet
The objective of inflation, which could also involve a transient period in which inflation is “moderately” above the target.

In this sense, COS admits to agree with the Governor of the Bank of France, Villeroy de Galhau, who affirmed last week that the temporary framework contemplated by the ECB so that inflation is 2% “quite before the end
From its projection horizon “is 12 to 18 months, which would be” the midpoint “of that horizon.

On the contrary, he does not share the opinion of some of his colleagues in the Board of Governing that the New Forward Guidance of the ECB should include an “escape clause”, since it is conditioned to the economic situation, which requires a commitment to react from
A certain way before certain inflation perspectives, not a commitment to unconditionally fix the official interest rates at a given level.