Draghi Speaks on ECB Policy
ECB Chief Mario Dragi says that he sees little evidence of inflation stabilizing at the goal level, and that there is no cause, currently, to deviate from the bank’s policy guidance. He spoke trying to squash the idea that the ECB will be tightening policy sooner than originally planned, saying that inflation in the Euro zone is not strong enough for officials to move for such a shift at this time.
Draghi’s message came not long after weeks of diverging signals from policy makers, raising questions over the strategy that the central bank would follow as it moved to exit the unprecedented stimulus. The recent upturn is starting to gain momentum, and the threat of deflation is off the table.
Slower purchases in the ECB’s 2.28 billion Euro plan for quantitative easing has helped to prompt some governors to call for changes to the bank’s guidance.
The ECB president said that the current policy plans, which expect that interest rates will remain low for a prolonged period, are still appropriate to ensure that growth and inflation are strong enough to withstand the challenges when the stimulus does eventually come to an end.
He added that before making any changes to any part of the bank’s economic stance, there must be sufficient confidence in the economy in the medium-term, so that when less supportive monetary policy is implemented, it will be strong enough to support the level of economic activity.
Following Draghi’s speech, the euro dropped to its lowest level since mid-march.