Mario Draghi leaves interest rates unchanged, ForexSQ.com” experts say the ECB president Mario Draghi speech started in Frankfurt on Thursday January 2017 with maintains bond buying program
Mario Draghi Speech January 2017
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Mario Draghi called on Germany to be calm as the European Central Bank keeps pumping stimulus into the euro area, saying rising inflation will eventually bring higher interest rates for savers.
“As the recovery will firm up, rates will go up as well,” the ECB president told reporters in Frankfurt on Thursday after the Governing Council reaffirmed its intention to keep its bond-buying program going until at least the end of the year. Asked about German criticism of the strategy, he said “the honest answer would be: Just be patient.”
German Finance Minister Wolfgang Schaeuble earlier responded to the ECB’s decision by saying his government will face “political problems” explaining the policy to the public. A surge in headline inflation last month in his country, Europe’s largest economy, sparked a media outcry and calls for the central bank to pull back on its stimulus.
“I trust the ECB will always do the right thing,” Schaeuble said at the World Economic Forum in Davos, Switzerland. He also warned that Draghi’s loose monetary policy encourages leaders to delay the structural economic reforms the region needs, saying “you give the political leaders some way to go around.”
Draghi noted that the rise in consumer prices in Germany, as with the euro area, is so far largely driven by oil prices, and officials will ignore gains that they see as transient.
ECB Speech January 2017
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“There are no convincing signs yet of an upward trend in underlying inflation,” he said. “The Governing Council will continue to look through changes in inflation if judged to have no implications for the medium-term outlook for price stability.”
While the euro-area inflation rate almost doubled in December to 1.1 percent, the strongest since 2013, that’s still well below the goal of just under 2 percent. Core price growth, excluding energy and food, only edged up to 0.9 percent from 0.8 percent.
In their first policy decision of the year, ECB officials reaffirmed their December decision that asset purchases will be reduced to 60 billion euros ($64 billion) a month from April, from 80 billion euros currently. Policy makers also kept the main refinancing rate at zero and the deposit rate at minus 0.4 percent, as predicted by all economists.
They also have an eye on political uncertainties stemming from a string of general elections, Britain’s pending exit from the European Union, and the start of Donald Trump’s U.S. presidency on Friday. Draghi said downside risks to the euro area are mostly from “global factors.”
Three-quarters of respondents in a survey before the decision said the ECB’s next major change to its stimulus will be announced no sooner than September.
Draghi, who reiterated his claim that the threat of euro-area deflation has largely disappeared, said the ECB would not react just because consumer-price gains in any one country are too high.
“A very substantial degree of monetary accommodation is needed for euro-area pressures to build up and to support headline inflation in medium-term,” Draghi said. “The important thing to explain is the recovery of the whole of the euro zone is in the interest of German citizens.”