Tags: ecb | draghi | stimulus | europe

ECB's Draghi: 'Ample Degree of Stimulus' Still Needed

ECB's Draghi: 'Ample Degree of Stimulus' Still Needed
(Michael Probst/AP)

Thursday, 26 October 2017 09:26 AM

European Central Bank chief Mario Draghi on Thursday said the eurozone economy still relied on "an ample degree" of stimulus, even as it took a first step towards scaling back easy money measures.

While praising an "increasingly robust and broad-based economic expansion", Draghi said price pressures remained "muted".

"Therefore an ample degree of monetary stimulus remains necessary for underlying inflation pressures to build up," he said at a press conference following a closely-watched meeting of the bank's governing council.

The ECB has in recent years taken extraordinary measures to push up growth and inflation in the eurozone.

It has set interest rates at historic lows, offers cheap loans for banks and is currently buying 60 billion euros ($72 billion) a month in government and corporate bonds.

As the eurozone economy picks up, calls have grown for the ECB to begin unwinding its ultra-loose monetary policies, as the Federal Reserve is doing in the United States.

The Frankfurt institution edged in that direction Thursday when it announced it would reduce its monthly asset purchases to 30 billion euros from January.

The scheme, originally set to last until December, will now run at least until September 2018, the ECB said.

With inflation still stubbornly low, Draghi was also eager to reassure investors the era of cheap money wasn't over yet and that the bank stood ready to tweak the asset purchasing programme, known as quantitative easing (QE), again if necessary.

"If the outlook becomes less favourable... we stand ready to increase the asset purchase programme in terms of size and/or duration," Draghi said.

But for now, he said the move to reduce bond buys reflected "growing confidence" that inflation was headed in the right direction.

The bank last month kept its inflation projection for 2017 unchanged at 1.5 percent, far off the ECB's target of just under 2.0 percent -- seen as most favourable for growth.

Consumer prices are expected to rise by just 1.2 percent in 2018, and by 1.5 percent in 2019, according to the ECB.

The ECB's slow-motion move away from QE has been complicated by the euro's rise against the dollar in recent months, with cheaper imports keeping the lid on consumer prices.

The euro has risen by more than 12 percent against the greenback this year.

In the wake of the ECB's announcement on scaling back asset purchases, the euro fell by 0.53 percent to $1.1749.

© AFP 2021


   
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European Central Bank chief Mario Draghi on Thursday said the eurozone economy still relied on "an ample degree" of stimulus, even as it took a first step towards scaling back easy money measures.
ecb, draghi, stimulus, europe
399
2017-26-26
Thursday, 26 October 2017 09:26 AM
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