ECB chief hints at more stimulus to come
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. –