Draghi ‘won’t hesitate’ to expand stimulus if needed

European Central Bank head Mario Draghi said the chief monetary authority for the eurozone “will not hesitate” to expand its stimulus program at its next meeting if needed to support the economy.

Draghi’s speech in Frankfurt on Friday reinforced his earlier statements taken by markets as a green light for action at the Dec. 3 meeting.

He said the ECB needed to assess whether “if left to its own forces, the economy will be able to achieve a self-sustaining trajectory. If not, then it will require more monetary stimulus.”

The ECB could increase its 1.1 trillion euro ($1.2 trillion) program of bond purchases, which injects newly printed money into the economy. It could also lower its rate on money deposited by banks farther into negative territory, a move that effectively pushes the banks to lend more. Currently, that rate is minus 0.2 percent.

Draghi argued that the current stimulus has had a strong effect in supporting the economy, which has this year been growing only gradually. He said the ECB’s efforts have cut borrowing rates for companies and increased their access to the credit they need to do business and expand.

Low fuel prices are also helping boost demand by putting more money in consumers’ pockets. The 19 countries that use the euro currency saw economic activity grow 0.3 percent in the third quarter from the quarter before. That was less than expected, and unemployment remains high at 10.8 percent.

The modest recovery is facing headwinds from an economic slowdown in emerging markets, Draghi warned. And he said that increased growth has not led to a pickup in currently weak inflation, which at an annual 0.1 percent remains far from the ECB’s goal of just under 2 percent.

Source: AP