EBC VP Constancio has been on the wires for the past hour in European Parliament and it’s difficult to pin down what he’s trying to say.
There are two routes for the ECB to go.
- Cut rates
- Do something creative to unlock lending to small and medium-sized enterprises
Constancio has stayed away from the first point other than noting that inflation has fallen quickly but he is sending mixed messages on lending. He says the ECB can’t force banks to lend and that surveys show there is no demand. Then he says that the ECB is still thinking about other incentives to increase bank lending.
An ECB rate cut is on the table but I still don’t see it happening in May and it looks like more creative ideas are still in their infancy.
Separately, he said the idea of getting rid of the 500-euro note is worth discussing — it’s an idea that has been floated recently.