The ECB president, Mario Draghi, said his staff would “continue to monitor economic and financial market developments very closely” but gave no clues as to what the bank might do.
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Economists surveyed by Bloomberg see the greatest chance of extra European Central Bank stimulus at the September 8 meeting and predict that the instrument of choice would probably be extending quantitative easing beyond March 2017. The European Central Bank earlier this month asked BMPS to cut its gross nonperforming loan exposur to €14.6 billion by 2018 from €46.9 billion in 2015.
The ECB president said over the coming months his organisation would be in a better position to assess the state of the eurozone economy and the impact of Brexit on growth and inflation.
“Our assessment is that euro area financial markets have weathered the spike in uncertainty and volatility with encouraging resilience”, he said. In order to achieve the 2% inflation rate, Fed this time has to declare more information and outlook for economy based on the economic data. 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.
As Draghi argued, it is still too soon to make a definite plan following the Brexit vote. The dilemma will be whether to tweak the scheme, making just technical changes, or enact a broader but more controversial shift that could fundamentally alter the nature of the ECB’s quantitative easing.
The European Central Bank remained on hold at its monetary policy meeting held Thursday, slightly delaying its decision to ease interest rates, against the backdrop of lacking bond-buying pressure in the central bank’s asset purchase program amid numerous global headwinds. Prolonging purchasing may raise the problem of a shortage of government bonds to buy under the ECB’s own rules on minimum yields.
The bank’s benchmark rate for lending to banks is zero.
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“Draghi will likely highlight increased downside risks to growth and inflation amid heightened uncertainty”, analysts at UniCredit bank wrote in a note to clients.
