Draghi may expand ECB asset purchasing programs as inflation worries mount
European Central Bank President (ECB) Mario Draghi said on Friday the monetary authority was ready to expand its asset purchase programmes if inflation remains too low for too long.
"We will continue to meet our responsibility – we will do what we must to raise inflation and inflation expectations as fast as possible, as our price stability mandate requires of us," Draghi said in a speech at an annual banking congress in Frankfurt.
"If on its current trajectory our policy is not effective enough to achieve this, or further risks to the inflation outlook materialise, we would step up the pressure and broaden even more the channels through which we intervene, by altering accordingly the size, pace and composition of our purchases."
Such a move would help ease credit conditions to offset the stagnating European economy and combat the regions dangerously low inflation rates. Annual Eurozone inflation was 0.4% in October, well below the ECB’s target of just below 2%.
The ECB has enacted new measures to boost the economy at least three times this year to stimulate the economic outlook in the euro area with limited success. Even President Draghi has stated that the central bank is limited in terms of the intervention that can be made.
The euro zone economy is likely to remain stagnant in the short-to-medium term.
Despite of the efforts employed by the ECB in recent months, Draghi noted on Friday that "a stronger recovery [in the Eurozone] is unlikely in the coming months." He expressed an overall gloomy outlook for the Eurozone, he said: “The Euruzone economy is likely to remain stagnant in the short-to-medium term”.
Can you spot the theme in today's speech from @ecb Draghi http://t.co/mh6c4Jysk9 pic.twitter.com/lSPnGYVnK2
— Lorcan Roche Kelly (@LorcanRK) November 21, 2014
The news follows calls from former Bank of England (BoE) Governor Mervyn King for Draghi to enact further measures, such as currency devaluation and full-blown quantitative easing, to boost stagnated Eurozone economies and decrease the looming deflationary risk.
The euro plunged against the dollar following Draghi's remarks, demonstrating the lack of confidence in the Eurozone.