The ECB’s favoured gauge of market inflation expectations, the five-year, five-year breakeven forward, fell below 1.50 percent for the first time since January 2015.
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As well, Draghi said “countries should benefit from growth-friendly budget policies (to be achieved via) more efficient public sectors and by moving towards a more growth-oriented taxation system”.
“The more turbulent the market gets between now and March, the more significant the action we’re likely to get from the European Central Bank”, said Chris Scicluna, head of economic research at Daiwa Capital Markets.
Prices at factory gates in the euro zone fell by more than expected in December, in another sign of the challenges facing the European Central Bank in bringing inflation nearer to its medium-term target. It will also reinvest the principal payments of the purchased assets once they mature for as long as necessary.
The improvement since then has been painfully slow despite the ECB’s stimulus, with the economy still well short of the 7.5% jobless rate seen before the 2007-08 financial crash.
Statistics agency Eurostat said the number of people out of work across the eurozone in December decreased by 49,000 to a total of 16.75 million, its lowest level since October 2011. Inflation dynamics are also tangibly weaker than we expected in December.
Taken together, that calls for “careful analysis” of how lower inflation rates “may influence future price and wage- setting in our economy”, Mr. Draghi said.
“The ECB is willing to contribute its share to ensuring that the recovery remains firmly on track”, he said in a debate broadcast live online.
He promised the ECB’s current monetary policy would be scrutinized at the next meeting of the governing board in early March, taking into account the new macroeconomic projections. “The second is China and other emerging market economies”.
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Despite forecasting or telegraphing more quantitative easing ahead, there are limitations on what the markets should expect.
