Economists expect the central bank will wait until the September policy meeting to add stimulus.
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A flurry of stronger-than-expected economic data from the USA also weighed on Treasury prices, where yields rose to their highest levels since the U.K.’s June 23 vote to leave the European Union, dubbed Brexit. Further ECB easing and US growth outperformance should drive EUR/USD lower in the autumn. “I would stress our readiness, willingness, ability to do so”, Draghi said.
“But Draghi reiterated that the bank is ready to act and we believe that it will up the pace of asset purchases and possibly cut interest rates at its next policy meeting in September”.
No changes were made to the bank’s bond buying programme which has been pumping €80bn into bond markets every month.
He has now called on eurozone governments to address the bad loans weighing down Italy’s banks and put in place “growth-friendly” policies. Prime Minister Matteo Renzi has floated the idea of using government money to bail them out, which could provoke a conflict with new European Union rules created to limit the burden of rescuing banks on taxpayers’ wallets.
The ECB has recently ramped up its stimulus efforts, meaning it could be some time before it decides to do so again, analysts say.
The main rate – which is used by countries across the eurozone – is now at an historic low of 0 per cent.
Analysts from UBS Group AG and SEB AB estimated the ECB may run out of German government debt to buy within six months as yields on about two-thirds of those securities had fallen to less than the minus 0.4 percent deposit rate, making them ineligible for central-bank purchases.
Europe is enjoying a modest economic recovery but inflation of 0.1% is abnormally low and unemployment is falling too slowly to make people in countries such as Spain and Greece feel good about the economy.
“The reaction was a little bit bullish when the (Draghi) press conference started because there were some expectations for more explicitly dovish language”, said Vassili Serebriakov of Credit Agricole.
“Draghi’s comments during the press conference did not give any hint on possible next European Central Bank steps”.
Draghi also said the Governing Council didn’t discuss tapering its asset purchases. Prime Minister Matteo Renzi has raised the possibility of using government money to bail them out, which risks a clash with new European Union rules limiting the extent to which troubled banks can dip into taxpayers’ pockets.
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A “public backstop is a measure that would be very useful and should be agreed with the Commission according to the existing rules”, Draghi told reporters.
