Draghi: ECB will intensify use of instruments to achieve inflation target

Discussion in 'Fundamental Analysis' started by FXStreet_Team, Dec 14, 2015.

  1. FXStreet_Team

    FXStreet_Team Well-Known Member Trader

    Oct 7, 2015
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    FXStreet (Mumbai) - The European Central Bank had slashed deposit rate by 10 basis points on 3rd December, along with extending the current QE programme to March 2017. It also said it would reinvest the principal payments on the securities purchased to support liquidity conditions. The central bank however disappointed the markets as it did not expand the amount of bonds purchased under QE programme. Today the ECB Chief Mario Draghi, in an effort to assure markets that the central bank would do all that it takes to push up price pressures in the euro zone, said there was no limit to the tools that it can opt for to raise inflation to target.

    He reassured that inflation target would be reached "without undue delay". "After the recalculation of our tools carried out by the Governing Council earlier this month, we expect inflation to reach our target without undue delay," Draghi said. With inflation hovering just above zero, the ECB is aware that further delays in achieving its inflation target of just below 2 per cent could damage its credibility.

    While speaking in Bologna, Italy today he reiterated that "If the ECB had to intensify the use of its instruments to ensure that it achieves its price stability mandate, it would" adding that ECB would do everything within its mandate, to bring inflation to its target of almost 2 per cent. "Within our mandate, there are no restrictions to our choice of which tools we use or how," Draghi said.

    Draghi is however aware that lower rates though can ensure price stability cannot guarantee lasting prosperity. He stressed on the need for “structural recovery” to lift “not just current growth but potential growth as well”. To boost potential growth, Draghi has called for increase in investment. He feels weak demand dynamics, the still-high private debt overhang and fragile private sector confidence have weighed on investment in the bloc. Draghi also urged countries to facilitate a "work-out" of toxic loans to facilitate recovery in credit and lending.
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