Draghi Warns Of Protectionist Threats After Signaling QE End

BRUSSELS/FRANKFURT/PARIS (Alliance News) - Risks from global factors such as protectionism has ...

Alliance News 14 June, 2018 | 4:13PM
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BRUSSELS/FRANKFURT/PARIS (Alliance News) - Risks from global factors such as protectionism has increased, European Central Bank President Mario Draghi warned on Thursday, after the bank signaled that it would end its massive bond-buying program at the end of this year.

"Uncertainties related to global factors, including the threat of increased protectionism, have become more prominent," Draghi said in the introductory statement to his press conference.

"Moreover, the risk of persistent heightened financial market volatility warrants monitoring."

Earlier on Thursday, the bank announced that it hopes to halve its monthly bond purchases to EUR 15 billion after September and to end them in December.

The Governing Council, which held the latest policy session the Latvian capital Riga, left the key interest rates unchanged. The bank said interest rates will remain at their present level at least through the summer of 2019 and beyond, if necessary.

Responding to questions from reporters, Draghi said the latest policy decision was unanimous, adding that policymakers did not discuss "if and when" to raise interest rates.

"The interest of our interest rate formulation is to give it a time dimension, but not a precise one," Draghi said.

The overall result of low interest rates has been vastly positive, he added.

The general character of the discussion was to remain patient, prudent and persistent and this was unanimously confirmed, he said.

Regarding asset purchases, Draghi said they were not disappearing, but has become a new part of monetary policy and remains a normal policy instrument.

He also said the collective intention of the Governing Council was to avoid any unwarranted tightening of financial conditions.

Replying questions on reinvestment of maturing bonds, Draghi said it will be discussed at a future meeting and it is an important discussion.

"We have to be mindful of the excess liquidity conditions," he noted.

The ECB Chief, himself from Italy, stressed that it was not of any interest to anybody to discuss the exit of the country from euro.

"The euro is irreversible because it's strong, because people want it," Draghi said.

Draghi unveiled the latest set of macroeconomic projections from the ECB Staff during the press conference.

The Eurozone growth forecast for this year was slashed to 2.1% from 2.4%, while the projections for the next year and 2020 were retained at 1.9% and 1.7%, respectively.

"The risks surrounding the euro area growth outlook remain broadly balanced," Draghi said.

He also said that the economic projections do not contain the impact of trade measures that have not been implemented yet and their direct consequences have been limited so far.

The euro area inflation outlook for both this year and next was raised to 1.7% from 1.4%, mainly due to higher oil prices. The forecast for 2020 was retained at 1.7%.

The progress towards a sustained adjustment in inflation has been substantial so far and the uncertainty around the inflation outlook is receding, Draghi said.

The bank expects underlying inflation to pick up towards the end of the year and thereafter to increase gradually over the medium term, supported by "monetary policy measures, the continuing economic expansion, the corresponding absorption of economic slack and rising wage growth."

Draghi also said that structural reforms in euro area countries must be stepped up substantially.

Copyright RTT News/dpa-AFX

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