Wednesday 23 October 2019

Governments could take action to help lift interest rates, says Draghi

Mario Draghi, president of the European Central Bank (ECB)
Mario Draghi, president of the European Central Bank (ECB)
Donal O'Donovan

Donal O'Donovan

Embattled European Central Bank (ECB) president Mario Draghi has called on European governments to loosen their own spending to boost the economy and help lift inflation, and therefore interest rates.

The ECB's policymakers are increasingly publicly split over the latest round of extraordinary monetary stimulus announced last month including negative interest rates.

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Responding to that criticism, Mr Draghi called for greater "alignment" between governments and central bankers, to boost the economy.

"A more active fiscal policy in the euro area would thus make it possible to adjust our policies more quickly," he said.

"Central bank independence is not an end in itself," he said in a speech in Milan. "It does not preclude communication with governments when it is clear that mutually aligned policies would deliver a faster return to price stability."

Mr Draghi's term is due to end on October 31. As that approaches, decision- making within the ECB has been marked by public dissent among governing council members, and an intervention from former members.

Criticism has mainly come from richer northern European countries, especially Germany and the Netherlands.

Minutes of the September ECB council meeting show measures including revived €20bn-a-month bond purchases and negative interest rates were proposed by Philip Lane, the former Central Bank of Ireland governor who took over as ECB chief economist earlier this year.

This role positions him to sustain Mr Draghi's policy legacy, as former IMF chief Christine Lagarde takes over as ECB president.

Irish Independent

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