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ECB to leave interest rates low for 'extended period' Draghi hints at further ECB stimulus moves
(about 1 hour later)
The European Central Bank (ECB) president, Mario Draghi, says that eurozone interest rates will remain low for an extended period. The European Central Bank (ECB) president says eurozone rates will remain low for an extended period of time and promised there would be "no limits" to action to reflate eurozone.
Mr Draghi also said they could fall to even lower levels.
His comments followed the ECB's regular meeting at which it kept rates unchanged at a barely perceptible 0.05% in the face of near-zero inflation.His comments followed the ECB's regular meeting at which it kept rates unchanged at a barely perceptible 0.05% in the face of near-zero inflation.
He also said they could go lower.
The overnight deposit rate was left at -0.3%. At the ECB meeting in December, this rate had been cut from -0.2%.The overnight deposit rate was left at -0.3%. At the ECB meeting in December, this rate had been cut from -0.2%.
That move was an attempt to push banks to lend instead of parking money at the ECB.That move was an attempt to push banks to lend instead of parking money at the ECB.
'No limits' Eurozone inflation is currently running at 0.2%, way below the ECB's target of near 2%.
"We have the power, willingness and determination to act. There are no limits how far we are willing to deploy our policy instruments," Mr Draghi said.
'Risks'
Mr Draghi told a news conference: "As we start the new year, downside risks have increased again amid heightened uncertainty about emerging market economies' growth prospects, volatility in financial and commodity markets and geopolitical risks."Mr Draghi told a news conference: "As we start the new year, downside risks have increased again amid heightened uncertainty about emerging market economies' growth prospects, volatility in financial and commodity markets and geopolitical risks."
He said that could make it necessary to review - and possibly reconsider - monetary policy at the next meeting in early March.He said that could make it necessary to review - and possibly reconsider - monetary policy at the next meeting in early March.
That meeting will have a new set of ECB macroeconomic projections to work with.That meeting will have a new set of ECB macroeconomic projections to work with.
He said that the recent falls in the oil price meant that inflation was likely to be "significantly lower" compared with the outlook in early December.He said that the recent falls in the oil price meant that inflation was likely to be "significantly lower" compared with the outlook in early December.
Eurozone inflation was below zero - that is, prices were falling - as recently as September, mainly due to falls in international energy prices, particularly crude oil.Eurozone inflation was below zero - that is, prices were falling - as recently as September, mainly due to falls in international energy prices, particularly crude oil.
In December, Mr Draghi said that eurozone inflation was expected to reach 1% in 2016. However, the ECB's forecasts were based on the assumption of oil prices averaging more than $50 a barrel this year, and oil is currently below $30.In December, Mr Draghi said that eurozone inflation was expected to reach 1% in 2016. However, the ECB's forecasts were based on the assumption of oil prices averaging more than $50 a barrel this year, and oil is currently below $30.
Mr Draghi said there were "no limits" as to how far it was prepared to go to raise eurozone inflation from its current rate of 0.2% to the ECB's target of near 2%.
"We have the power, willingness and determination to act. There are no limits how far we are willing to deploy our policy instruments," he said.
In December, the ECB had also extended its monthly €60bn stimulus programme by six months to March 2017.In December, the ECB had also extended its monthly €60bn stimulus programme by six months to March 2017.