ECB chief hints at more stim­u­lus to come

The Myanmar Times - - International Business -

EURO­PEAN Cen­tral Bank chief Mario Draghi said the eu­ro­zone’s ten­ta­tive re­cov­ery re­mained heav­ily re­liant on the bank’s ul­traloose mone­tary pol­icy, fu­elling ex­pec­ta­tions of more stim­u­lus to come.

“We can­not be san­guine over the eco­nomic out­look,” Mr Draghi said in a speech at a bank­ing con­fer­ence in Frank­furt last week.

Among the fac­tors cloud­ing the euro area’s growth prospects were geopo­lit­i­cal risks, anaemic in­fla­tion and an over-re­liance on the ECB’s easy money poli­cies, he said.

“The re­cov­ery re­mains highly re­liant on a con­stel­la­tion of fi­nanc­ing con­di­tions that, in turn, de­pend on con­tin­ued mone­tary sup­port,” Mr Draghi said, adding that the bank was “com­mit­ted to pre­serv­ing the very sub­stan­tial de­gree of mone­tary ac­com­mo­da­tion”.

The re­marks ap­peared to con­firm ob­server ex­pec­ta­tions that the ECB will an­nounce an ex­ten­sion of its 80 bil­lion euro a month bond-buy­ing pro­gram when the gov­ern­ing coun­cil meets on De­cem­ber 8.

The scheme, aimed at en­cour­ag­ing lend­ing and in­vest­ment, is cur­rently sched­uled to end in March but an­a­lysts widely be­lieve more ef­forts are needed to rein­vig­o­rate growth and drive up in­fla­tion.

Mr Draghi said that while eu­ro­zone in­fla­tion hit a two-year high in Oc­to­ber to reach 0.5 per­cent, it was still far off the bank’s tar­get of just un­der 2pc.

“The ECB will con­tinue to act, as war­ranted, by us­ing all the in­stru­ments avail­able within our man­date” to get in­fla­tion up to that level, Mr Draghi said.

The ECB has in re­cent months em­barked on an un­prece­dented stim­u­lus pro­gram to lift the econ­omy out of its dol­drums, of­fer­ing cheap loans to banks and buy­ing well over 1 tril­lion eu­ros in cor­po­rate and gov­ern­ment bonds in a bid to pump cash into the sys­tem.

It has also kept in­ter­est rates at his­tor­i­cally low lev­els, much to the dis­may of banks who say it has squeezed their profit mar­gins.

Deutsche Bank CEO John Cryan, speak­ing at the same Frank­furt gather­ing, said that while he dis­agreed with some of Mr Draghi’s poli­cies he had to at least give him credit for tak­ing ac­tion – in con­trast to Euro­pean gov­ern­ments who have failed to back up the ECB’s ef­forts with fis­cal re­forms. –

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