ECB holds rates unchanged but Draghi leaves door open for more stimulus in December
The European Central Bank left ultra-loose monetary policy unchanged on Thursday but kept the door open to more stimulus in December, firmly shooting down any talk of tapering its 1.7 trillion euro asset-buying program.
Offering few clues to the euro zone central bank’s next move, ECB President Mario Draghi left a wide range of options on the table and emphasized that a long-awaited rise in inflation is predicated on “very substantial” monetary accommodation.
Struggling to stave off deflation, the ECB has provided unprecedented stimulus for years. It has cut rates into negative territory, buys 80 billion euros worth of bonds each month and has offered banks free loans, all with the aim of boosting inflation back to the ECB’s target of just under 2
percent.
In a possible argument for even more easing, Draghi warned on Thursday that an expected rise in inflation in the coming month would be driven mostly by the fading effect of past oil price falls, raising doubts whether it will be sustainable.
“There are no signs yet of a convincing upward trend in underlying inflation,” Draghi told a news conference.
But he also said that any decision about the ECB’s policy stance would be left until December, when the bank would have to decide whether to extend its bond buys, now due to end in March.
“Sometimes it’s also important to say what we did not discuss. And we didn’t discuss tapering or the intended horizon of our asset purchase program,” Draghi said.
In what may be seen as a de facto commitment to some form of extension of asset purchases, known as quantitative easing, or QE, Draghi also said that the program would not end abruptly when the time comes and would be gradually wound down.
“My perception is that a sudden stop as outlined before is not … present in anybody’s mind, it’s not something that people naturally contemplate,” he said, calling a sudden end “unlikely”.
