• Draghi's last shot: the ECB prepares the anti-crisis arsenal


25 July 2019The ECB opens the possibility of interest rate reductions. The Governing Council of the Central Bank expects that the rates will remain "at the current level or at a lower level" at least until the first half of 2020, and in any case for "the time necessary to guarantee a continuous and sustained convergence of inflation to its objective medium term ", ie the 2% threshold. No intervention for now on the cost of money in the Eurozone. The Governing Council has decided to keep the interest rates on the main refinancing operations, on the marginal refinancing operations and on deposits with the central bank unchanged at 0.00%, 0.25% and -0.40% respectively.

"We expect interest rates to remain at levels equal to current or lower than at least the entire first half of 2020," said ECB President Mario Draghi.

Frankfurt considers the possibility of a new QE. In fact, in the face of inflation "constantly below the levels set by the ECB's mandate, the ECB's Governing Council underlined the need for a" very accommodating monetary policy for a prolonged period of time "and" is ready to adapt everyone its tools ". This is stated in the concluding document of the ECB Council, which - it is specified - "has instructed the Eurosystem repeating committees to examine the options" including the strengthening of forward guidance or the "composition of potential new purchases of net assets", or Quantitative Easing.

The need for a highly accommodative monetary policy stance for a prolonged period of time "and commissioned the Eurosystem committees to examine various options, including the size and composition of a potential new stock purchase program". This is what we read in the ECB press release drawn up at the end of the board meeting.

In Sintra in June, President Mario Draghi had indicated that the board already in Vilnius that the governors had discussed various options, including the re-launch of the Qe. Today's statement indicates that the central institute is preparing to announce a significant stimulus package at the next meeting scheduled for 12 September.

We do not accept a permanently low inflation rate, and the key point is that we have the same determination whether it is higher (2%, ed) or lower, "said ECB president Mario Draghi, explaining the meaning of commitment to a "symmetrical" approach to the inflation target.

Dragons: elements of uncertainty. Threat to protectionism in the Euro area
"The latest information indicates that unfavorable global circumstances continue to weigh on the outlook for the euro area. The prolonged presence of uncertainties related to geopolitical factors, the growing threat of protectionism and vulnerabilities in emerging markets leaves its mark on the climate of trust ", ECB President Mario Draghi told a press conference in Frankfurt. In support of the economy, there are instead continuous increases in employment and wage growth.

"The prolonged presence of uncertainties linked to geopolitical factors, the growing threat of protectionism and the vulnerabilities of emerging countries are weakening economic sentiment, particularly in the manufacturing sector," explained Draghi.

"Monetary policy has done a lot to support the Eurozone. But if this deterioration continues, fiscal policy will become essential."

Less likely to rebound in the second half of 2019
"Our latest projections suggested that there may have been a rebound in the second half of the year. Now, the latest signs show weak growth both in the second and third quarters and so this rebound is now less likely," said the president of ECB.

"Necessary significant level of monetary stimulus"
A significant level of monetary stimulus continues to be necessary for financial conditions to remain very favorable and support euro area expansion, continue to raise prices and the development of underlying inflation over the medium term, "he said. ECB president Mario Draghi.

"High Debt Countries Strengthen Public Accounts"
"Countries with high public debt must reinforce their fiscal bearings and all countries should increase their efforts to achieve a more growth-oriented composition of public finances," said Draghi, at a press conference.

"Strengthen the implementation of structural reforms"
"The implementation of structural reforms in the euro area countries needs to be significantly strengthened to increase productivity and the growth potential of the Eurozone, reduce structural unemployment and increase resilience".