The Governing Council holds its next policy meeting on September 12 and has all but promised a stimulus package, with economic growth faltering as a global trade war rumbles on and Germany’s manufacturing sector already in recession.
New Austrian National Bank (OeNB) Governor Robert Holzmann set out a hawkish stance before his first meeting as a European Central Bank policymaker, saying stepped-up monetary stimulus for the euro zone posed more risks than benefits.
Holzmann, 70, is a pensions specialist who has worked at the World Bank and the International Monetary Fund. The man he succeeds at the OeNB and on the ECB's Governing Council, Ewald Nowotny, also has a hawkish reputation.
In an interview with Austrian broadcaster ORF aired on Saturday, Holzmann, who takes over from Nowotny on September 1, said he was working with OeNB staff to draw up his policy positions.
"I will probably voice a somewhat more critical stance concerning suggestions about a future deepening of the monetary footprint," he said.
"Cheap money has its charms but also its limits, especially when it lasts for a long time."
A monetary policy novice, Holzmann said his background as an economics researcher and professor had showed him what worked and made him more of a hawk than a dove.
Holzmann said the ECB's move early this decade to ease policy and buy government bonds was important to preserve the euro. But much of this work was done and the balance sheets of the ECB and euro zone central banks were flush with such assets.
"The probability of further (positive) effects is very slight. On the other hand the short- or long-term risks associated with this have risen to a great extent because low rates per se carry the risk of misallocation of resources and misallocation of price discovery.
"You see this in real estate prices, in gold prices and in erratic stock prices. The long-term effects could be very negative for Europe and the world," he said in the interview aired on Saturday.
Such a low-rate environment favoured indebted countries the most, but also offered possibilities for more fiscally conservative countries like Germany and Austria to boost spending, he said.
Holzmann said people would simply have to get used to lower growth, inflation and interest rates. "We will probably not quickly return to (the high) levels of the post-war era," he said.
Holzmann, a political independent, said he was "generally sceptical about negative interest rates," and that imposing them on retail savers would not boost consumer spending.
He saw risks to the Austrian economy mostly from abroad, for instance should a slowdown in Germany spill over to eastern European countries that are Austria's big trading partners, but he called this scenario manageable.