ECB monetary policy could temporarily ease inequality in Europe

Monetary policy measures can improve welfare, contribute to reducing income disparities

The European Central Bank's ultra-easy monetary policy may actually reduce income inequality in Europe, ECB Vice President Vitor Constancio said on Tuesday, rejecting the argument that asset buys disproportionately benefit the wealthy.

Constancio said the ECB's stimulus measures lower unemployment and thus increase disposable income for Europe's poorest, compressing inequality, at least in the short term.

"This result confirms that, from the distributional perspective, the main impact of expansionary monetary policies is on the reduction of unemployment with positive effects on the reduction of inequality," Constancio said in Lisbon.

"(Monetary policy) measures can improve their welfare and contribute toward reducing income disparities, at least in the short-term."

But he added that such steps are likely to be temporary with the "hollowing out of the middle class" and the increasing polarisation of incomes likely continuing over the longer term.