Downside risks to emerging markets point to need to re-assess policy, says ECB's Constancio

The European Central Bank will be in a better position come December to assess whether its current monetary policy settings were appropriate or not, a member of its governing council said on Monday.

Nonetheless, should the ECB decide to act then it does have “further” monetary tools at its disposal, the Portuguese member of the council, Vitor Constancio, said.

"Concerns about growth prospects in emerging markets and unfavourable developments in financial and commodity markets have signalled downside risks to the outlook for growth and inflation, relative to the latest ECB staff projection from September," he said.

Fresh staff forecasts to be published at the ECB's next policy meeting would be one “crucial factor”, the rate-setter said.

In particular, the speed at which inflation was seen returning to the central bank’s target of close to but below 2% would be one key factor.

The central banker pointed his finger at the continued “sluggish” recovery in the aftermath of the financial crisis as the main culprit for the low rates of inflation, describing it as a “dismal” performance.

"The crisis left a permanent economic loss with broad scars in our societies."

On Monday morning, the European Union’s statistical office revised its estimate for the rate of consumer price inflation in the Eurozone in October to 0.1% year-on-year, from an initial estimate of 0%.

The data revealed non-energy goods prices were stronger than initially reported, but core services inflation remained very modest, Barclays said in a research mote e-mailed to clients.

“Together with the uncertainty surrounding energy and unprocessed food prices, euro area inflation outlook remains fragile and requires further monetary policy, in our view,” Fabio Fois told clients.

Fois continued to expect the ECB to ease monetary policy further in December.