| 7.6°C Dublin

ECB to keep monetary policy loose for a long time - Draghi

Close

European Central Bank (ECB) president Mario Draghi

European Central Bank (ECB) president Mario Draghi

European Central Bank (ECB) president Mario Draghi

EUROPEAN Central Bank President Mario Draghi has signalled that he intends to keep interest rates low for a protracted period of time in a bid to boost inflation in the 18-member bloc.

The recovery in the Eurozone continues to falter, with a gauge of manufacturers dropping back to its lowest level this year on Tuesday, growth stagnating in the second quarter and Italy falling back into recession. Business confidence in Germany, the bloc's biggest economy, has fallen more than expected.

Mr Draghi stressed that while the Frankfurt-based bank would do all in its power to try and stimulate growth, countries needed to do more to improve their own economies.

Inflation

"Monetary policy will remain accommodative for a long time and I can tell you that the (ECB) Governing Council is unanimous in committing itself to using the tools at its disposal to bring inflation back to just under 2pc," Mr Draghi told French radio in an interview later published by the ECB

The ECB President said he doesn't see that there is a risk of deflation but said the recovery is "modest, weak, uneven, and fragile, but it's not recession."

Consumer inflation in the bloc rose 0.1pc month-on-month in August for a 0.4pc year-on-year increase.

Inflation has fallen steadily since the end of 2011, reflecting a weak Eurozone economy and near-record unemployment.

Mr Draghi told radio station Europe 1 that the ECB will continue to have a very expansionary monetary policy for an extended period of time until the rate of inflation veers close to 2pc.

"But at the same time, as I said before, proper structural policies and fiscal policies have to be in place," he added.

He said the euro was "irreversible" and stressed again that they would do whatever it takes to preserve it.

The euro has dropped 6pc against the dollar since early June, when the ECB announced stimulus measures including interest-rate cuts and targeted longer-term loans for banks, and is trading near the lowest level in more than a year.

Securities

Officials cut rates again this month and said the central bank will start buying asset-backed securities and covered bonds.

There were further signs earlier this week that the recovery in the bloc is struggling.

Business activity in the Euro- zone rose last month at its slowest pace so far this year.

New orders rose just fractionally, with the rate of increase waning for the third successive month.

And employment was largely unchanged once again as companies held back from hiring staff because of weak sales growth, according to the flash Purchasing Managers Index for September.

While PMIs in Ireland are recording multi-year highs and economic growth here is forecast to rise as high as 5pc this year, the recovery across the currency bloc as a whole has been struggling to take hold.

In the services sector, growth of activity slowed to a three month low, while manufacturing fared worse, falling back to a level not seen since July of last year.

Indo Business