Tuesday 6 December 2016

Draghi says no evidence of bubbles from QE

Published 16/04/2015 | 02:30

A protester jumps on the table in front of the European Central Bank President Mario Draghi during a news conference in Frankfurt. Photo: Reuters
A protester jumps on the table in front of the European Central Bank President Mario Draghi during a news conference in Frankfurt. Photo: Reuters
A protester jumps on the table in front of the European Central Bank President Mario Draghi during a news conference in Frankfurt, April 15, 2015. REUTERS/Kai Pfaffenbach
An activist throws paper at European Central Bank president Mario Draghi during a press conference (AP)
Security officers detain a protester who jumped on the table in front of the European Central Bank President Mario Draghi during a news conference in Frankfurt, April 15, 2015. REUTERS/Kai Pfaffenbach
Security officers detain a protester who jumped on the table in front of the European Central Bank President Mario Draghi during a news conference in Frankfurt, April 15, 2015.REUTERS/Kai Pfaffenbach
Security officers detain a protester who jumped on the table in front of the European Central Bank President Mario Draghi during a news conference in Frankfurt, April 15, 2015. REUTERS/Kai Pfaffenbach
Security officers detain a protester who jumped on the table in front of the European Central Bank President Mario Draghi during a news conference in Frankfurt, April 15, 2015. REUTERS/Kai Pfaffenbach
A protester jumps on the table in front of the European Central Bank President Mario Draghi during a news conference in Frankfurt, April 15, 2015. REUTERS/Kai Pfaffenbach
A protester jumps on the table in front of the European Central Bank President Mario Draghi during a news conference in Frankfurt, April 15, 2015. REUTERS/Kai Pfaffenbach
Mario Draghi, ECB president

Yesterday's European Central Bank press conference was more exciting than normal as a woman climbed onto ECB president Mario's Draghi's desk to make her point about the ECB but the press conference itself was not without interest either for investors.

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Mr Draghi told reporters in Frankfurt that the ECB has no plans to curb or curtail its money-printing programme although it expects Eurozone economic recovery to broaden and strengthen.

He added that policymakers see no evidence of financial bubbles building in the Eurozone, as the central bank's €1.1tn stimulus programme sends more bond yields into negative territory.

"Purchases are intended to run until the end of September 2016 and, in any case, until we see a sustained adjustment in the path of inflation that is consistent with our aim of achieving inflation rates below, but close to, 2pc over the medium term," Mr Draghi added. At the last count, Eurozone inflation was running at minus 0.1pc.

Mr Draghi said he was surprised at speculation about exiting the programme early since it was only a month old.

Turning to Greece, he said future help for the cash-strapped country was firmly in the hands of the Greek government, which has yet to produce a programme of economic reforms that is acceptable to its creditors.

ECB policymakers sanctioned further Emergency Liquidity Assistance for Greece's banks up to €74bn, a reminder of the dire financial straits that the country is in.

"We approved ELA and we'll continue to do so, extend the liquidity to the Greek banks while they are solvent and they have adequate collateral," Mr Draghi said, adding that there was no end date for the lending.

Time is running out for Athens to improve a package of reforms required for the release of loans needed to stay afloat.

Were Greece, first bailed out in 2010 and again two years later, ultimately to tumble out of the euro, it would deal a blow to the credibility of the currency union.

For now though, the ECB's €1 trillion-plus money printing scheme to buy chiefly government bonds is underpinning confidence. "Through these measures we will contribute to a further improvement in the economic outlook, a reduction in economic slack and a recovery in money and credit growth," Mr Draghi said. "We expect the economic recovery to broaden and strengthen gradually."

The QE programme has already prompted a rise in the value of bonds and investors are questioning whether it could become too costly for the ECB to buy sufficient quantities in countries including Ireland.

Mr Draghi said there were plenty of bonds to buy. "We don't see any problems," he said. "Our programme is flexible enough in any event to be adjusted if circumstances were to change."

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