European Central Bank (ECB) President Mario Draghi on Friday said the eurozone’s tentative recovery remained heavily reliant on the bank’s ultra-loose monetary policy, fueling expectations of more stimulus to come.
“We cannot be sanguine over the economic outlook,” Draghi said in a speech at a banking conference in Frankfurt, Germany.
Among the factors clouding the euro-area’s growth prospects were geopolitical risks, anemic inflation and an overreliance on the ECB’s easy money policies, he said.
Photo: AP
“The recovery remains highly reliant on a constellation of financing conditions that, in turn, depend on continued monetary support,” Draghi said.
He added that the bank was “committed to preserving the very substantial degree of monetary accommodation.”
Draghi’s remarks appeared to confirm observer expectations that the ECB would announce an extension of its 80 billion euro (US$84.7 billion) a month bond-buying program when the governing council meets on Dec. 8.
The scheme, aimed at encouraging lending and investment, is scheduled to end in March, but analysts widely believe more efforts are needed to reinvigorate growth and drive up inflation.
Draghi said that while eurozone inflation hit a two-year high last month to reach 0.5 percent, it was still far off the bank’s target of just under 2 percent.
“The ECB will continue to act, as warranted, by using all the instruments available within our mandate” to get inflation up to that level, Draghi told the audience.
The ECB has in recent months embarked on an unprecedented stimulus program to lift the economy out of its doldrums, offering cheap loans to banks and buying more than 1 trillion euros in corporate and government bonds in a bid to pump cash into the financial system.
It has also kept interest rates at historically low and even negative levels, much to the dismay of banks that say it has squeezed their profit margins.
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