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ECB's Rehn says 'better to be safe than sorry' with policy

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10/10/2019 | 10:31am EDT
Finland's central bank governor Rehn in Helsinki

HELSINKI (Reuters) - It is better to be safe than sorry before shifting the policy gear back to normalisation, Finnish policymaker Olli Rehn said on Thursday, in defence of the European Central Bank's decision to raise stimulus.

The ECB eased its monetary policy further last month to lift growth and inflation, a divisive decision which has sparked an unusual public spat between the majority doves, with Rehn among them, and more conservative policymakers from the north of the euro zone.

"As long as the synchronized slowdown continues, there is no economically meaningful alternative to unconventional monetary policies – and it is better to be safe than sorry before shifting the policy gear back to normalization," Rehn said at an economic policy panel in Helsinki.

He dismissed arguments that there would have not been danger of a deflationary spiral previously in the euro area.

"For instance, the European Commission in 2013-14 was very concerned about the spectre of deflation, and expressed that also publicly," said Rehn, who was the EU Commissioner for Economic and Monetary Affairs and the Euro between 2010 and 2014.

Rehn repeated his previous warning that "the declining inflation expectations can become permanently stuck at low levels," similar to what has happened in Japan. [L5N26O1NY]

"We don't want to be in the midst of a deflationary spiral until we take action. This is also one of the key lessons of the Japanese experience," he said.

(Reporting by Anne Kauranen; Editing by Bernadette Baum)

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