7 Nov 2013
ECB's Draghi: Rate cut in line with forward guidance
FXstreet.com (Barcelona) - The ECB Governing Council decided to cut the main interest rate by 25 basis points to 0.25% at their November monetary policy meeting. During the subsequent press conference the ECB head Mario Draghi stated that the move was in line with the central bank´s forward guidance policy.
The president raised worries about deflation risks in the Eurozone, saying that inflation in the area could remain low for a prolonged period of time, before gradually returning to the ECB´s target level of 2%. Therefore, the monetary policy stance will be kept accommodative for as long as necessary.
Mario Draghi also hinted at the possibility of further rate cuts by indicating that Eurozone borrowing costs would remain at low levels until an improvement in economic conditions is noted. He declared that the ECB would continue conducting the 3-month LTROs at least until Q2 2015, as well as MROs, as fixed rate tender procedures, at least until July 2015. Furthermore, he said that the central bank has a wide range of instruments at its disposal, which could be activated whenever needed.
The ECB head acknowledged the end of the 18-month recession in the Eurozone, emphasizing however that growth remains weak. He quoted the continuing uncertainty on financial markets as one of the main threats, along with “higher commodity prices, weaker than expected domestic demand and export growth, and slow or insufficient implementation of structural reforms in euro area countries.”
The president raised worries about deflation risks in the Eurozone, saying that inflation in the area could remain low for a prolonged period of time, before gradually returning to the ECB´s target level of 2%. Therefore, the monetary policy stance will be kept accommodative for as long as necessary.
Mario Draghi also hinted at the possibility of further rate cuts by indicating that Eurozone borrowing costs would remain at low levels until an improvement in economic conditions is noted. He declared that the ECB would continue conducting the 3-month LTROs at least until Q2 2015, as well as MROs, as fixed rate tender procedures, at least until July 2015. Furthermore, he said that the central bank has a wide range of instruments at its disposal, which could be activated whenever needed.
The ECB head acknowledged the end of the 18-month recession in the Eurozone, emphasizing however that growth remains weak. He quoted the continuing uncertainty on financial markets as one of the main threats, along with “higher commodity prices, weaker than expected domestic demand and export growth, and slow or insufficient implementation of structural reforms in euro area countries.”