Draghi leaves interest rates at zero: "Risks to growth remain downward"

2019-10-24T13:33:41.149Z

Interest rates pinned to zero in the euro area, with the ECB reiterating its orientation not to increase them for a prolonged period of time. The ECB then confirmed the restart of purchases of government securities, now imminent from November 1, at the rate of 20 billion euros a month and "as long as necessary to strengthen the impact of accommodating its reference rates", without therefore fixing a deadline for these transactions. These are some of the provisions of the package of new stimulus measures launched in September, in response to the weakening of the economy that jeopardizes inflation to the institution's target values. Just today, the October business survey data confirmed a stagnation in the euro area, ballasted by the contraction in the manufacturing sector. Decisions are in line with market expectations. To take stock of the situation was the president Mario Draghi, who today held his last Governing Council: from November, the French Christine Lagarde will take over. Draghi: "Low rates until inflation prospects near but below 2%" "We expect interest rates to remain at or below current levels until we see inflation prospects converge firmly on a sufficiently level next, but less than 2% in our projection horizon and this convergence will not be reflected coherently in the dynamics of underlying inflation "said Draghi at a press conference in Frankfurt. "As of November 10, net purchases for 20 billion a month" "The Governing Council has decided to resume net purchases as part of its asset purchase program at a monthly rate of 20 billion euros starting November 10 - he said still the president of the ECB- We expect that they will continue as long as necessary to strengthen the impact of accommodating our reference rates and that they will end shortly before we start raising reference rates ". "Highly accommodative monetary policy for a long time" "The Governing Council reiterated the need for a highly accommodative monetary policy stance for a prolonged period of time and remains ready to adjust all its instruments, where appropriate, to ensure that inflation continues to get closer to the level pursued, in line with its commitment to symmetry "he explained. "Risks for growth prospects remain downward-oriented" "Risks to growth prospects in the euro area remain on the downside". ECB president Mario Draghi said in a press conference in Frankfurt, underlining how 'these risks mainly concern the prolonged presence of uncertainties connected to geopolitical factors, the growing threat of protectionism and vulnerabilities in emerging markets'. "Countries with high public debt pursue prudent policies" "Governments of countries with high public debt must pursue prudent policies that create the conditions for automatic stabilizers to operate freely," the ECB president said. All countries - ie both those with sufficient fiscal space for pro-growth measures and those with high high debt to which prudent policies are advised - "should step up efforts to achieve a more growth-friendly composition of public finances". "Improving the functioning of the Economic and Monetary Union is a priority" "The transparent and coherent application of the European Union reference framework for economic and fiscal governance, over time and in various countries, remains essential to consolidate the capacity of the economy of the euro area ", he said, stressing that" improving the functioning of the Economic and Monetary Union remains a priority ". The Governing Council, added Draghi, "appreciates the work in progress and urges the adoption of further specific and incisive measures to complete the banking union and the union of capital markets". "The benefits of negative rates far outweigh the side effects" The benefits brought by the introduction of negative rates were clearly higher than the side effects. ECB President Mario Draghi said in a press conference in Frankfurt in response to the alarm raised by the Monetary Fund on the risk that a long-term negative rate policy could lead to negative consequences for the financial system. "The IMF has not said that negative rates have not been effective - Draghi added - in reality the evaluation was overall positive and for us it is very positive. The negative rates have stimulated the economy and employment. "IMF has looked at the long-term horizon, but it is something that we monitor carefully and that is why in September we introduced a two-tier system for the remuneration of deposits". "It will take some time before we reach Qe limits" "I agree with the assessment of our chief economist Philip Lane that it will take a long time to reach the limits of quantitative easing," the ECB president concluded, referring to capital keys on which the asset purchase program is structured. Today was Mario Draghi's last directorate. After eight years of intense, honored and celebrated service, Mario Draghi has reached his latest ECB Governing Council. From November 1, the French Christine Lagarde will take over the presidency. And a handover ceremony will be held on November 28th. As expected from the one who the vast majority of observers consider the savior of the euro, Draghi leaves the institution having already set up a wide package of measures with which to counter the recent slowdown in the economy. Measures deemed necessary given the implications that economic weakness has in slowing down the normalization of inflation. In fact, the ECB's mandate is to guarantee price stability, quantified in a high average life close to 2 per cent (while at the moment it is close to 1%). Draghi: "I tried to carry out my mandate in the best way" "I feel like someone who has tried to carry out his mandate in the best possible way". The president of the ECB, Mario Draghi, stated this during a press conference. To those who asked him what his regret was, he explained that he had no answer. "I focus on things that need to be done and not on the past," he said, recalling that "the past cannot be changed". "No advice for Lagarde, he knows very well what to do" "I have no advice to give to Christine Lagarde. She knows very well what to do and will have a lot of time in front of her to decide together with the board of directors the way to follow". ECB President Mario Draghi said at a press conference in Frankfurt.