“From a macro perspective, European economic data has remained resilient following the UK’s decision to leave the EU”, he said.
Advertisement
Just ahead of markets closing in Europe on Thursday, the euro rose 0.67 per cent to 1.134 against the dollar.
This time the changes may be just technical but they are necessary preparatory work for any serious policy easing as the European Central Bank is running out of assets to buy due to its self-imposed limits.
Mr Draghi also cut eurozone growth expectations for 2017 and 2018, from 1.7% to 1.6%, although the Bank raised forecasts for 2016 from 1.6% to 1.7%.
Mr Draghi said that while inflation remained low at an annual rate of 0.2%, the European Central Bank was forecasting it to rise in the coming months.
The ECB has also made a decision to continue its quantitative easing (QE) programme, which will see it buy €80bn of assets a month until March 2017 (“or beyond, if necessary”). “In truth, no one should have been surprised by the ECB’s refusal to extend the date of the QE programme as the Eurozone economy did not really deteriorate since the last meeting on 21st July”. In addition, he said the ECB’s decision that action was not necessary was a judgement for “the time being”.
The ECB will act using all instruments if warranted, and the committee has been tasked to evaluate options for securities and asset purchases. The ECB repeated that it “continues to expect the key ECB interest rates to remain at present or lower levels for an extended period of time and well past the horizon of the net asset purchases”.
But even a simple extension of the €1.74 trillion asset purchase programme, started in March 2015, is not so easy as the European Central Bank is running out of bonds to buy due to its self-imposed constraints.
Draghi did not say what would be studied but there has been past speculation about such things as raising the limit on how much of each bond issue the ECB can own, buying bonds yielding less than the bank’s -0.4 percent deposit rate or extending the range of eligible bonds.
Bigger changes could involve the purchase of new types of assets, such as bank bonds, non-performing loans, or in the extreme case, stocks. Nakaso said the central bank will pursue its massive stimulus program by striking the right balance between its powerful policy effects and potential adverse effects on financial intermediation. Inflation is well below the bank’s target, with consumer prices barely changed this year.
Advertisement
The lack of growth was – again – blamed a lack of economic reforms by governments and also the Brexit vote.
