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27-Oct (Reuters) — The effectiveness of the European Central Bank’s ultra-loose monetary policy may decline over time while side effects could increase, a key policymaker argued on Thursday, as the bank contemplates whether to extend its asset-buying program.
“The longer the measures are in place, the less effective they may become,” ECB board member Yves Mersch said in a speech.
“The fact that additional lending in the euro area is losing momentum and that German banks are saying that the negative deposit facility rate is constraining lending volumes warrants attention,” Mersch said. “We must be vigilant that this development does not spread to other euro area countries.”
PG View: One only need look at Japan over the past 20+ years for proof positive that loose policy loses its effectiveness over time.
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