Dragons: ready to act if inflation does not start again – Il Sole 24 Ore

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This article was published on November 12, 2015 at 24:36.
The last change is the November 12, 2015 at 24:39.

FRANKFURT – The European Central Bank President, Mario Draghi, has repeated again this morning in a hearing at the European Parliament, at the next meeting on 3 December, the board will review again the monetary policy. An assertion that the markets have interpreted as a signal that the ECB is preparing to strengthen the monetary stimulus, particularly through purchases of securities, the so-called Qe.

Draghi argued that it is a tool, “particularly powerful and flexible” and also mentioned that he had said before that one of the possibilities available to the bank is the lengthening of the purchase program beyond September of 2016. He also reiterated that the amendments may include the size of purchases (now 60 billion euro per month) and their composition. He added that the ECB has other tools available, which did not specify. He did not mention a possible cut in the rate on deposits of banks with the ECB itself, already in negative territory at -0.20%, a measure that had recently mentioned on several occasions and that financial markets believe that it could be adopted together with the strengthening of Qe.

The ECB President noted that expectations that the inflation rate can “normalize” in the sense of being closer to the goal of below, but close to 2%, is now lower than last March, when the bank started the Qe. Together with the observation that one of the key inputs in the decision in December will be the new provisions of the staff of the ECB (which is expected ritoccheranno estimates downward both inflation is the growth in the eurozone), the words of Dragons were read by markets as a green light to action at the next council. Similar comments had come these days from other members of the executive committee, as the vecepresidente Vitor Constancio and Benoit Coeuré, even if the ECB wants to avoid giving the impression that the decision has already been taken, in the face of the reluctance of some component advice. This point was made, for example, the governor of the Central Bank of Estonia, Arno Hansson, who argued that the ECB should give more time to the measures already implemented. Along the same lines the president of the Bundesbank, Jens Weidmann.

The European recovery is slow and gradual, said Draghi, but more resilient than expected to the weakening of foreign demand for eurozone exports. Growth, he said, is driven by consumption and, increasingly, from the investments.

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