AMSTERDAM (MktNews) - The European Central Bank (ECB) is pursuing its own monetary policy strategy, and any "hectic" reaction to current conditions by the central bank could increase market volatility, Bundesbank Vice President Juergen Stark said Monday.
The ECB "is not sailing in the wake of the Fed," Stark said in the text of his speech to the third annual Capital Market Forum here.
Stark repeated that the eurozone inflation rate is likely to drop below the ECB's 2% price stability ceiling in the second half of 2001.
"The ECB is close to its objective of safeguarding price stability, and keeping inflation below 2% in the medium term," he said.
Stark also said there were limits to the predictability of monetary policy, since the ECB must reserve the right "of taking financial markets by surprise in the short run, to ensure that the central bank can counter undesirable developments."
"In the long run, however, monetary policy must be predictable," he said.
The bulk of Stark's speech involved a sharp rejection of any notion of formalising or strengthening the role of the Eurogroup of eurozone finance ministers, particularly vis-a-vis the ECB.
"The formalisation of the Eurogroup is incompatible with the role of the Ecofin council, as envisaged in the EC Treaty," Stark said.
"The Eurogroup is presumably to be strengthened primarily in its relations with the ECB," Stark said in noting discussions on the topic.
"That would definitely be inconsistent with the provisions on EMU, especially those governing the independence of the ECB," he said, adding that the ECB "has no need of any political corrective."
Stark took particular aim at the idea of any coordination between monetary policy and other policy areas, saying this was "out of the question."
"Already today, the dialogue between the Eurogroup and the ECB is intensive. It cannot and must not be transformed into coordination (of policy areas) including monetary policy."
Stark also rejected the notion that the chairman of the Eurogroup could also become a spokesman for the euro. "The only spokesman for the euro is the President of the ECB. He is 'Mr. Euro.'"
"Any political attempt to involve the ECB ex ante in political decisions or to create a second 'Mr. Euro' (namely, the chairman of the Eurogroup) would only lead to a blurring of responsibilities and thus to confusion."