Don't pressure us, says Draghi as ECB poised for June boost
The European Central Bank is ready to take action next month to boost the eurozone economy if updated inflation forecasts merit it, its president said yesterday, warning outsiders not to pressure the bank into action.
Stressing that the euro's strength was "a serious concern", ECB chief Mario Draghi said the exchange rate would have to be addressed, adding that the bank's policymakers held a discussion about "all instruments" at their meeting in Brussels.
Eurozone inflation ticked up to 0.7pc in April from March's 0.5pc, but remains far below the ECB's target of just under 2pc, and Mr Draghi said: "There is consensus about being dissatisfied with the projected path of inflation."
"The governing council is comfortable with acting next time but before we want to see the staff projections that will come out in early June," he said, after the ECB left interest rates on hold, as expected.
The policy instruments touched on in yesterday's meeting included interest rate cuts, liquidity measures and even quantitative easing – central-bank speak for money printing to buy assets, a policy already pursued by the US Federal Reserve, the Bank of Japan and the Bank of England.
The ECB governing council met in Brussels against the backdrop of a Franco-German spat over ECB policy regarding the strength of the euro – one factor Mr Draghi has identified as a potential trigger for policy action.
"The strengthening of the euro in the context of low inflation and still low levels of economic activity, is a cause for serious concern in the view of the governing council," he said.
But Mr Draghi pushed back against the countries – led by France – and institutions that have been urging the ECB to take action to boost the economy and counter low inflation.
"We have received plenty of advice," he said.
"We are independent, so people should be aware that if this might be seen as a threat to our independence it could cause long-term damage to our credibility."
Yesterday's strong signal that the ECB is ready to act in June will heighten speculation about just what the ECB could do.
Mr Draghi raised the idea in an April 24 speech of a "broad-based asset purchase programme" if the inflation outlook worsens. But just a few days later he played down the prospect of QE any time soon.
A far more likely scenario is a cut in rates – both in the ECB's main refinancing rate and perhaps in its deposit rate. (Reuters)