COPENHAGEN: The President of the European Central Bank (ECB) Mario Draghi on Thursday announced to continue with the low-interest-rate policy for longer and demanded structural reforms in all countries.
“Based on our regular economic and monetary analyses, we decided to keep the key ECB interest rates unchanged,” Draghi told a press conference after a monthly Governing Council meeting of ECB in Vienna.
Consequently that the interest rate on the main refinancing operations and the interest rates on the marginal lending facility and the deposit facility will remain unchanged at 0.00 percent, 0.25 percent and minus 0.40 percent respectively, Draghi said, adding that “the monthly asset purchases of 80 billion Euros will run until the end of March 2017, or beyond, if necessary.”
In addition, the ECB will start buying corporate bonds next week. With this measure, the ECB wants to ensure that the interest of these securities declines. It should improve credit conditions for businesses, encourage new issues and should give the economy a thrust.
The ECB is now more optimistic for the economic growth in the euro zone than last March: it expects a growth of 1.6 percent for 2016, and 1.7 percent in 2017 and 2018. In March the ECB expected a growth of 1.4 percent for 2016.
Draghi named “developments in the global economy,” the “upcoming British referendum” and “other geopolitical risks” as downside risks. However, the balance of risks has improved, Draghi said.
Despite economic recovery Draghi expects further a low inflation in the euro area. “Looking ahead, on the basis of current futures prices for oil, inflation rates are likely to remain very low or negative in the next few months before picking up in the second half of 2016,” Draghi pointed out.
The inflation rates should recover further in 2017 and 2018, he said. However, the aim of below, but close to 2 percent inflation rate seems still not to be reached. The rate was at minus 0.1 percent in May.
Draghi invited the politics to support the measures of the ECB. “To reap the full benefits from our monetary policy measures, other policy areas must contribute much more decisively, both at the national and at the European levels,” he said.
Draghi demanded structural reforms in all euro area countries. “The focus should be on actions to raise productivity and improve the business environment, including the provision of an adequate public infrastructure, which are vital to increase investment and boost job creation,” he pointed out.
On June 8 Eurosystem will start making purchases under its corporate sector purchase program (CSPP), the European Central Bank said in a press release.
“Moreover, starting on June 22, it will conduct the first operation in its new series of targeted longer-term refinancing operations,” it said.
In March, the ECB decided to implement further monetary stimulus measures including cutting the three key interest rates, expanding its monthly purchase of assets by 20 billion euros (22.6 billion U.S. dollars) to 80 billion euros, bringing investment grade euro-denominated bonds issued by non-bank corporations into the asset purchase program, as well as conducting a new series of targeted longer-term refinancing operations.
