LONDON/FRANKFURT (Oct 28): The European Central Bank will provide stimulus until a sustained inflation rebound, even as its unprecedented measures come with side effects and face constraints, two policymakers said on Friday, just as the bank is contemplating more easing. A key concern for the ECB is that negative interest rates depress bank margins, lower bank share price and increase the cost of capital. This could in turn reduce lending to the economy, countering the very stimulus the ECB is hoping to achieve. Still, Coeure also dismissed any suggestion the ECB was about to give up, arguing that missing the bank's 2% inflation target too often could lead to permanently lower inflation, a hard to break cycle. "And lower inflation expectations directly lower the equilibrium nominal interest rate, requiring a lower interest rate to create monetary stimulus," he said.

Source: The Edge Markets October 28, 2016 12:08 UTC