ECB officials appear to be trying to strike a balance between holding the door open to further policy action and yet stressing the limitations of monetary policy in order to pressure governments into taking steps themselves to encourage growth. But there is a danger that these mixed messages fall on deaf ears all around.
We think the ECB will eventually have to put its reservations aside and take more action, probably in the form of a further extension of its asset purchases. But it is right to stress that monetary policy cannot solve all of the currency union’s problems.
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