European Central Bank (ECB) President Mario Draghi yesterday (19 January) announced the institution’s monetary policy would remain unchanged and asked for more patience as the economic recovery continues. EURACTIV Spain reports.
Draghi told a Frankfurt press conference that the ECB’s governing council would maintain interest rates as they are and insisted that the bank is satisfied with progress so far.
He also confirmed that the council would continue to makes purchases at the current rate under its Asset Purchase Programme (APP) until March. The ECB said that this would then continue until December, and beyond if needed.
Under the APP, the Frankfurt institution will continue to buy public and private debt at a rate of €80 billion a month. After March, this will be scaled down to €60 billion.
Draghi also confirmed that the ECB would be willing to extend or even increase the size of the programme if the financial outlook worsens or conditions become unfavourable.
The Italian president also insisted that inflation rises must be consistent and durable, and not just temporary, warning that “there are no signs yet of a convincing upward trend in underlying inflation”.
He shared that the eurozone’s annual rate of inflation hit 1.1% in December but warned that its increase from 0.6% in November was largely down to energy prices. The ECB has a stated target of stabilising inflation at just below 2%.
Core inflation, which discounts volatile factors like food and energy prices, still topped 0.9% in December though.
Draghi took steps to differentiate between inflation rate and price pressures in order to placate German observers that are calling for a quicker end to the bank’s monetary stimulus, claimed UniCredit’s eurozone chief economist Marco Valli.
Commerzbank chief economist Jörg Krämer said that “Draghi downplayed the increase in inflation rate and improving economic figures” in the eurozone.
“Its purpose was to avoid giving the impression that the ECB is plotting a way out of its ultra-generous monetary policy,” he added.
In Germany, where inflation hit 1.7% in November, warnings have been made about price increases.
Krämer criticised that the ECB’s liquidity had largely been focused on the financial and property markets, and that the real economy is only now starting to feel the benefit.
He did acknowledge though that the monetary policy’s transmission channels are less blocked than last year and that growth is higher than expected.
Draghi said that the governing council had been unanimous in agreeing that the decisions taken in December were the right course of action and that monetary policy that has been in place since June 2014 has been satisfactory.
He cited several indicators and figures, including eurozone growth of between 0.3% and 0.6% each quarter since 2015, as well as the creation of over 4 million jobs over the last three years.
Eurozone unemployment stands at 9.8%, which is the lowest rate since July 2009, the Italian banker claimed.
Consumer confidence is also at its highest since April 2015 and industrial activity is at levels not seen since May 2011. Economic recovery remains strong and on track, with inflation mostly driven by energy prices.
But Draghi, speaking on the eve of Donald Trump’s inauguration as US president, also added that economic risks posed by “the uncertain global situation” also remain.