At the meeting of the Shadow ECB Council on 1 July members expressed some concern that coordinated fiscal consolidation could dampen an already rather weak recovery in the euro area. Growth forecasts were cut. Members are worried about a tendency of the euro to strengthen again, as they would like to see the euro weakening further to offset the restrictive impact from fiscal policy. In terms of interest rate policy there was near unanimity that the ECB should not change its key interest rate any time soon. One member expressed a bias toward lower rates. All members agreed that liquidity provision should be kept ample and rates low, to offset the restrictive impact from fiscal consolidation. |
