Medium-term scenario would be worse if not due to current ECB policy: chief economist

The medium-term scenario would be worse if the European Central Bank (ECB) had not pursued the current policy of negative interest rates and quantitative easing, said a senior official of the bank here on Thursday.

In an interview with the Irish national radio and television broadcaster RTE, Philip Lane, chief economist of the ECB and a member of its Executive Board, said that the world is “still in the legacy of the crisis” and European economy which could do more in terms of spending should do more.

He admitted that the current ECB policy is having an impact on the European property market and said that this would form part of the current review of the bank’s policies.

He also said ECB’s only focus is the eurozone economy and any policy good for a wider eurozone is good for Ireland.

Lane had been the governor of the Central Bank of Ireland since November 2015 before he joined the ECB as a chief economist in June 2019.

He delivered a speech at the fifth European Financial Forum which was held in Dublin.

He came back to Ireland at a time when the country just held a general election, in which Sinn Fein, a major opposition party, surged to be the country’s second largest party which could make it part of the next government.

In the interview with RTE, Lane expressed his opposition to an idea put forward by Sinn Fein in its election manifesto that the Central Bank of Ireland should be given the powers to cap mortgage interest rates as part of the measures to solve the country’s housing crisis.

He also suggested that any incoming government in Ireland must adopt a prudent approach to managing any future drop in the country’s corporation tax receipts.