President Draghi has previously identified Brexit as a key risk that could shave up to 0.5% off Euro-Zone economic growth over the next three years.
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While the European Central Bank insists that the survey results do not represent the views of its staff and decision-making bodies, the SPF survey usually provides an indication of where the ECB’s own forecasts – scheduled for release on September 8 – are headed. As such, helping Italy’s financial institutions to remove NPLs from their books would make them far less vulnerable and would also enable the ECB’s policies to become more effective.
ECB President Mario Draghi had indicated last month that additional stimulus could be “in the cards”, pointed out Jennifer Vail, head of fixed income research at U.S. Bank Wealth Management, in her weekly market commentary.
Indeed, the euro and German yields were broadly unchanged late on Thursday with little volatility during Draghi’s news conference.
It also left its deposit rate at minus 0.4 percent and its marginal lending rate at 0.25 percent.
Mario Draghi played down forecasts quantifying the impact of the vote on the eurozone economy saying more time was needed to assess the fall-out though he acknowledged it created a “downside risk”. The program is now due to end in March. Prolonging purchasing may raise the problem of a shortage of government bonds to buy under the ECB’s own rules on minimum yields.
But when asked about this problem at Thursday’s meeting, European Central Bank chief Draghi said the governing council had not discussed specific instruments and would wait until September to assess whether any further monetary easing measures were needed. “I think in worrying about the coming months, whether we’ll actually be able to fulfill this objective, proper attention should be given to evidence we’ve given in past few months and the ability to exploit flexibility”. Around 55% of German government debt is ineligible for purchase by the European Central Bank.
The main rate – which is used by countries across the eurozone – is now at an historic low of 0 per cent.
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Faced with questions from reporters on whether the bank is doing enough, Draghi stressed he would only reiterate his previous comments.
