The President of the European Central Bank (ECB) made on Thursday, a few minutes after you have submitted a package of stimulus measures that surprised the markets, a defense of the monetary authority’s ability to fight deflation in the euro area , which still stands there on the ECB euro thanks to the intervention area.
the talk in the press conference following the council meeting of ECB governors Mario Draghi explained the measures taken and which consist of a descent of all interest rates to new record lows, strengthening the monthly asset purchases made by the central bank volume and the launch of four new long-term loans to eurozone banks with interest rates which may be negative.
in a scenario that many economists and market intervening give signs begin to doubt the ability of central banks to cope with stagnant growth and falling threat of the trap of deflation, Mario Draghi decided to pull gals , defending what has already been done by the ECB and ensuring that the central bank retains the ability to fight.
“the answer [to the charge of lack of power of central banks] was given today by our measures. It’s a long list of measures. Today we showed that we have no shortage of ammunition, “said the ECB president.
Furthermore, Draghi assured, the measures work. “We have a lot of data showing that the measures result in recovery. The recovery is not spectacular, but it’s there, “he said. And for those who wanted more evidence, Draghi left a question, who thereupon replied: “What would have happened if we had done nothing? A disastrous deflation “.
This phrase may have cost to listen to one of the public and the next opponents of the policy that has been followed by the central bank, the president of Germany’s central bank and a board member of ECB governors, Jens Weidmann, has strongly criticized the decision to buy debt of euro zone countries.
Weidmann, that due to the rotating voting system in place at the ECB, had no right to vote in decisions taken at this meeting should have been in discussions of the members to prevent the existence of consensus. Mario Draghi told reporters however that decisions were taken with an “overwhelming majority”, provided also that all members, including Weidmann, have the right to influence the decision and discuss it, regardless of whether they count or not with the right to vote.
for the markets, which were surprised by the size and number of measures that have been announced, one of the moments of Draghi’s press conference that deserved more attention, it was when the President of the ECB hinted about what might come to pass below.
on the one hand, Draghi assured “that interest rates if they would keep low for a long period of time and well beyond asset purchases” that the ECB plans to keep at least until March 2017.
on the other hand, the maximum of the ECB official said “not expected to be necessary to go back down rates”, which turned out to be a disappointment to the markets, causing a recovery of the euro, which minutes before had fallen sharply after the announcement of the measures.
Still, Draghi was keen to point out that “the facts can change.” And to the surprise of many, not completely closed the door for any future, the possibility of what is seen as one of the most radical monetary expansionism policies: delivery by central bank money directly to people, a measure also known as “throwing money from a helicopter”.
“it’s a very interesting concept that is being discussed by scholars,” Draghi said, when asked by a journalist about the possibility of the central bank move next to the financial system and deliver money directly to people. The ECB President said however that the idea “has accounting and legal complexities” and that has not yet spoken on the board of governors of the ECB.
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