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ECB's Draghi Signals Further Action

MarioDraghi 110614

European Central Bank President Mario Draghi reiterated on Thursday that the central bank rate-setting body is unanimous in its commitment to use more tools and stands ready to take additional stimulus measures if needed.

"Should it become necessary to further address risks of too prolonged a period of low inflation, the Governing Council is unanimous in its commitment to using additional unconventional instruments within its mandate," Draghi said in its introductory statement to the customary post-decision press conference in Frankfurt.

"The Governing Council has tasked ECB staff and the relevant Eurosystem committees with ensuring the timely preparation of further measures to be implemented, if needed."

Earlier, the central bank left the main interest rates unchanged for a second straight month. The refinancing rate was held at a record low 0.05 percent, the deposit rate at -0.20 percent and the marginal lending rate at 0.30 percent.

Draghi said the central bank will soon start its asset-backed securities purchases, after it began buying covered bonds last month. The bond-buying programme will last at least two years and coupled with the targeted long-term refinancing operations to be held until June 16, they 'will have a sizeable impact' on the ECB balance sheet, he added.

Following this, the ECB balance sheet is expected to move towards the dimensions it had at the beginning of 2012, Draghi said.

The ECB Chief also stressed the increasing differences in the monetary policy cycle between major advanced economies. The monetary policy has already responded to the outlook for low inflation, slowing growth and subdued lending in euro area, he said.

Recent media reports had suggested a rift in the Governing Council over the stimulus measures, especially a full-blown quantitative easing. Responding to question from reporters, Draghi maintained the unanimity in the rate-setting body.

"Our monetary policy measures will together contribute to a return of inflation rates to levels closer to our aim," Draghi asserted. "The Governing Council will closely monitor and continuously assess the appropriateness of its monetary policy stance."

Eurozone economic recovery is likely to continue to be dampened by high unemployment, sizeable unutilised capacity, and the necessary balance sheet adjustments in the public and private sectors, he said. The bank expects inflation to remain low at current levels in coming months, before rising gradually in 2015 and 2016.

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