EUROPE – The European Central Bank says central bankers will increasingly need to monitor the impact of demographic ageing on the wider economy and markets.

“Obviously monetary policy is not a tool that was designed to address the ageing problem,” said ECB executive board member José Manuel González-Páramo.

“But monetary policy can and does make a positive contribution by providing a stable, non-inflationary macroeconomic environment, which is supportive of growth.

“And to deliver this, central bankers will increasingly need to monitor the impact of ageing, on the real economy, on financial markets, and on the public finances.”

He told a conference in Brussels last week that there needed to be an awareness of the impact that ageing “may be having on important variables for monetary policy such as the natural or equilibrium rate of interest, or the relative strength of the various channels through which monetary policy affects economic activity and prices”.

He said: The action that governments take to address the ageing problem will not only determine whether or not Europe can afford to grow old, it will also make the central banker’s task of delivering price stability that little bit easier, or more difficult in the years to come.”

The Frankfurt-based central bank has been in the pensions news recently. Last month it axed State Street as sole manager of its pension fund, replacing it with Irish Life.

And late lat year it warned that low interest rates may lead to “reckless or speculative” investing by pension funds.