Monday 5 December 2016

European Central Bank 'to review monetary policy stance at March meeting'

Published 21/01/2016 | 15:01

European Central Bank president Mario Draghi speaks during a news conference in Frankfurt, Germany (AP)
European Central Bank president Mario Draghi speaks during a news conference in Frankfurt, Germany (AP)

The European Central Bank (ECB) is ready to take action if plunging oil prices and weaker growth in China hurt the economy, ECB president Mario Draghi has told rattled investors.

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The chief monetary authority for the 19 countries that use the euro currency left its key interest rates untouched and did not ramp up its existing 1.5 trillion-euro (£1.15 trillion) monetary stimulus programme.

However, Mr Draghi noted that inflation remains far below the ECB's target of just below 2%, considered a healthy level for economic growth.

"It will therefore be necessary to review and possibly reconsider our monetary policy stance at our next meeting in early March," he told reporters in Frankfurt, Germany.

Worries that the world can no longer rely on China for strong growth, along with falling oil prices, have rattled investors and sent global stocks lower, though they also have the potential to spur private consumption.

Mr Draghi said: "The economic recovery in the euro area continues to be dampened by subdued growth prospects in emerging markets, volatile financial markets, the necessary balance sheet adjustments in a number of sectors and the sluggish pace of implementation of structural reforms."

The ECB decided to leave its benchmark interest rate unchanged at a record low 0.05%.

Until that changes or other measures are taken, markets may have to find their own way forward without counting on more help from central banks - a prospect investors may find unnerving.

The ECB already increased its stimulus at its meeting on December 3, and analysts say it would need solid evidence that that stimulus is not working before acting again.

Press Association

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