Draghi Warns Of Protectionist Threats After Signaling QE End
14 Juin 2018 - 12:47PM
RTTF2
European Central Bank President Mario Draghi warned on Thursday
that risks from global factors such as protectionism has increased
after the bank signaled that it would end its massive bond-buying
program at the end of this year.
"Uncertainties related to global factors, including the threat
of increased protectionism, have become more prominent," Draghi
said in the introductory statement to his press conference.
"Moreover, the risk of persistent heightened financial market
volatility warrants monitoring."
Earlier on Thursday, the bank announced that it hopes to halve
its monthly bond purchases to EUR 15 billion after September and to
end them in December.
The Governing Council, which held the latest policy session the
Latvian capital Riga, left the key interest rates unchanged. The
bank said interest rates will remain at their present level at
least through the summer of 2019 and beyond, if necessary.
Responding to questions from reporters, Draghi said the latest
policy decision was unanimous, adding that policymakers did not
discuss "if and when" to raise interest rates.
"The interest of our interest rate formulation is to give it a
time dimension, but not a precise one," Draghi said.
The overall result of low interest rates has been vastly
positive, he added.
The general character of the discussion was to remain patient,
prudent and persistent and this was unanimously confirmed, he
said.
Regarding asset purchases, Draghi said they were not
disappearing, but has become a new part of monetary policy and
remains a normal policy instrument.
He also said the collective intention of the Governing Council
was to avoid any unwarranted tightening of financial
conditions.
Replying questions on reinvestment of maturing bonds, Draghi
said it will be discussed at a future meeting and it is an
important discussion.
"We have to be mindful of the excess liquidity conditions," he
noted.
The ECB Chief, himself from Italy, stressed that it was not of
any interest to anybody to discuss the exit of the country from
euro.
"The euro is irreversible because it's strong, because people
want it," Draghi said.
Draghi unveiled the latest set of macroeconomic projections from
the ECB Staff during the press conference.
The Eurozone growth forecast for this year was slashed to 2.1
percent from 2.4 percent, while the projections for the next year
and 2020 were retained at 1.9 percent and 1.7 percent,
respectively.
"The risks surrounding the euro area growth outlook remain
broadly balanced," Draghi said.
He also said that the economic projections do not contain the
impact of trade measures that have not been implemented yet and
their direct consequences have been limited so far.
The euro area inflation outlook for both this year and next was
raised to 1.7 percent from 1.4 percent, mainly due to higher oil
prices. The forecast for 2020 was retained at 1.7 percent.
The progress towards a sustained adjustment in inflation has
been substantial so far and the uncertainty around the inflation
outlook is receding, Draghi said.
The bank expects underlying inflation to pick up towards the end
of the year and thereafter to increase gradually over the medium
term, supported by "monetary policy measures, the continuing
economic expansion, the corresponding absorption of economic slack
and rising wage growth."
Draghi also said that structural reforms in euro area countries
must be stepped up substantially.
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