Monday December 22, 2014 Search
Weather | Athens
13o C
8o C
News
Business
Comment
Life
Sports
Community
Survival Guide
Greek Edition
Draghi says ECB prepared to add stimulus if deflation risks rise

By Matthew Brockett

European Central Bank President Mario Draghi said policy makers are ready to add to stimulus if the outlook for prices deteriorates, though there are currently no signs of deflation in the euro area.

“We don’t have any evidence of people postponing their expenditure plans with a view to buying the same thing at lower prices, in other words we don’t see what is defined to be deflation,” Draghi said after a Group of 20 meeting in Sydney yesterday. “We are aware of the risks. The Governing Council is willing and ready to take any action in case these risks were to gain strength.”

Economists are divided over whether the Frankfurt-based ECB will increase stimulus to counter the risk of deflation after euro-area inflation slowed to 0.7 percent in January, less than half the bank’s 2 percent target. Draghi said the council will have “the full set of information needed for deciding whether to act or not” by its next policy meeting on March 6 in Frankfurt, when it will publish a 2016 inflation projection for the first time.

He also spoke at length about signs of economic recovery in the euro zone, saying there are initial indications that confidence is returning and domestic demand is picking up.

“I have to be cautious about this because we are not seeing strong, unambiguous developments,” Draghi said. “We are seeing first signs of a development which, if protracted in time, could gain strength.”

Draghi said the inflation rate fell to similar levels after the Asian and Lehman Brothers crises. The drop in core inflation was mostly driven by the currency bloc’s crisis-hit countries, which was “not entirely unwelcome,” while global price changes for energy and food were also a factor, he said.

“You can explain the present level of inflation,” Draghi said, adding medium-term price expectations are also “firmly anchored at 2 percent.”

ECB Executive Board member Peter Praet said in an interview with Portugal’s Expresso published on Feb. 22 that “weakness in price development is extending to the medium term” and that the central bank has tools to use if its mandate to maintain price stability isn’t being achieved.

Even so, the ECB’s benchmark rate is already at 0.25 percent and a cut may involve taking the deposit rate below its current level of zero, something council member Jens Weidmann described yesterday as “uncharted territory.”

“We don’t know what the reaction would be and what the effect is,” he told Bloomberg News in Sydney.

Weidmann indicated his support for suspending sterilization of the ECB’s historic bond purchases to increase liquidity and help reduce volatility on money markets.

“I wouldn’t rule out pausing sterilization” of purchases made under the now-defunct Securities Markets Program, said Weidmann, who heads Germany’s Bundesbank. “If we’re discussing how to inject liquidity into the market, instead of creating a new instrument, the most straight-forward manner would certainly be just to either pause the absorption operation or reduce them in size.”

Ending the liquidity drain would add about 175 billion euros ($241 billion) to the euro-area financial system.

Draghi said while the ECB’s pledge to keep rates low for an extended period has helped to reduce money-market volatility, halting sterilization is “one of the instruments we’re looking at.”

“We have several instruments for our monetary policy, one of which is what Jens has hinted at,” he said. A worsening in the medium-term outlook for price stability would require a different response. “We look at that, we stand ready to act.”

[Bloomberg]

ekathimerini.com , Monday February 24, 2014 (10:09)  
Investors putting plans on hold
Alpha Bank Cyprus to absorb local Emporiki
Greece’s 10-year bond yield drops 13 bps to 8.30 pct
Traders stay focused on Tuesday’s vote
Gov´t seeks better result in second presidential vote as bribe claim probe shelved
With all political parties now actively preparing for the prospect of snap elections, MPs are to vote in the second ballot of a critical three-phase presidential vote at noon on Tuesday. The...
Civil servants to grade evaluation scheme
As of Monday, Greek civil servants are now able to have a say in the public sector evaluation scheme that is currently undergoing fine-tuning by the Ministry of Administrative Reform. By log...
Inside News
SOCCER
Special day for Abidal, lucky one for PAOK
PAOK scraped through its Livadia challenge beating Levadiakos to remain on top of the Super League for Christmas, one point ahead of Olympiakos that enjoyed a great game at Kalloni and offer...
BASKETBALL
Explosive Barca unfazed by Panathinaikos, bomb scare
Panathinaikos lost 80-67 at home to Barcelona on Friday in a rather meaningless game at the end of the first group stage of the Euroleague, but the encounter will be remembered for the bomb ...
Inside Sports
INTERVIEW
Klaus Regling stresses debt sustainability through commitment to reforms
BRUSSELS – The man who is responsible for the loans to Greece as managing director of the European Stability Mechanism (ESM/EFSF), Klaus Regling, is the only high-ranking European official w...
INTERVIEW
‘Crisis of confidence will come back again and again,’ says Thomas Piketty
He’s treated like a rock star wherever he goes to lecture. His book “Capital in the 21st Century,” a study on income and wealth inequality from the 18th century to the present, recently tran...
Inside Comment
SPONSORED LINK: FinanzNachrichten.de
SPONSORED LINK: BestPrice.gr
 RECENT NEWS
1. Investors putting plans on hold
2. Gov´t seeks better result in second presidential vote as bribe claim probe shelved
3. Civil servants to grade evaluation scheme
4. Police collar fraudsters who conned money out of jobless
5. Bill aims to close down landfills, curb EU fines
6. Alpha Bank Cyprus to absorb local Emporiki
more news
Today
This Week
1. Greek parliament vote in balance after Samaras election offer
2. Prosecutor gathers depositions in Independent Greeks 'bribe' probe
3. Euro shaky on ECB and Greece, dollar keeps edge
4. Government accuses SYRIZA and Independent Greeks of 'clear alliance'
5. Draghi starts squaring QE circle in month of persuasion for ECB
6. Klaus Regling stresses debt sustainability through commitment to reforms
Today
This Week
1. Samaras summons bond vigilantes with euro exit talk
2. High stakes
3. Europe's drama in Greece needs final act to avoid tragedy
4. A friendly yet firm message from Pierre Moscovici
5. On the edge but not gutless
6. Ship with 200 migrants off Pylos towed to Italy after passengers refuse to stop in Greece
   Find us ...
  ... on
Twitter
     ... on Facebook   
About us  |  Subscriptions  |  Advertising  |  Contact us  |  Athens Plus  |  RSS  |   
Copyright © 2014, H KAΘHMEPINH All Rights Reserved.