It is too early for the European Central Bank to assess whether it needs to respond to the coronavirus epidemic with policy, even if the epidemic presents a risk to growth, Central Bank chief Gabriel Makhlouf said today.
"I still think it is too early to come to a view on what we at the European Central Bank should do about coronavirus," he told a conference in Berlin.
He added that all attention should be focused on supporting the health system.
"Right now, other than paying attention, I am not sure we have to rush to action," Mr Makhlouf, who sits on the ECB's rate-setting Governing Council, said.
The Central Bank Governor also said that the European Central Bank may need a clearer, simpler inflation target, making the case for improved communication with the public.
The ECB aims for inflation at "below but close to 2%", a wording that some have called confusing and ambiguous.
The ECB is currently reviewing its target as part of a broader analysis of its entire policy framework.
The current formulation could suggest that the ECB cares more about too high inflation than too low, and may create a false perception that the bank can fine-tune inflation to a tenth of a percent, critics say.
"We central banks need to do a better job at communicating and explaining," Gabriel Makhlou said in Berlin today.
"It seems that there continues to be uncertainty about exactly what 'close to, but below' means," he added.
Public comments suggest policymakers are willing to set the target at simply 2%.
The biggest discussion in the review seems to be about how much deviation from this target the ECB could tolerate and how to define the boundaries of this tolerance.
"It has been argued that since central banks are unlikely to hit a point target on a regular basis, having one makes it harder to explain policy to the public and that a range, with or without a focal point, may be more realistic and therefore provide the central bank with more credibility," Mr Makhlouf said.
Another problem is that while the ECB is fighting ultra low inflation, the general public perception is that prices are actually rising rapidly.
Part of the problem is due to the low share of housing costs in the inflation basket, meaning that much of the recent rise in house prices may not be reflected in official inflation data.
"The question we have to consider is whether the current consumer price index is helping to communicate the central bank's objectives in the most effective way, even though it may be a perfectly reasonable tool for policymakers and informed observers," Mr Makhlouf said.