ECB’s Draghi stresses commitment to low interest rates until inflation target is met
European Central Bank President Mario Draghi defended the central bank’s easy-money policies in Germany’s capital on Tuesday, arguing that ultralow interest rates haven’t harmed German households and stressing that the ECB would keep its policies in place until it reaches its inflation target.
The comments will reinforce expectations that the ECB plans to boost its €1.7 trillion bond-purchase program at its next policy meeting in early December. The program is currently due to expire in March.
“We remain committed to preserving the very substantial degree of monetary [easing] which is necessary to secure” the ECB’s goal of keeping inflation just below 2%, Mr. Draghi said in a lecture in Berlin.
Financial markets were rattled earlier this month by a media report suggesting that the ECB might start to wind down, or taper, its bond purchases. At a news conference last week, Mr. Draghi called that report “uninformed,” and strongly signaled that the central bank would decide in December to extend the program.
Despite the ECB’s aggressive measures—which include subzero interest rates, €80 billion a month of bond purchases and cheap loans for banks—eurozone inflation has hovered around zero for more than two years. Most investors therefore expect the ECB to extend its so-called quantitative-easing program by at least six months, or around half a trillion euros.
But the ECB has increasingly come under fire over its policies in Germany, its host nation and largest shareholder. Senior German politicians, including Finance Minister Wolfgang Schaeuble, have publicly criticized the ECB for policies that they worry harm German savers.
In his speech on Tuesday, Mr. Draghi played down such concerns. He argued that low interest rates don’t harm German households or shift financial income toward southern European countries at Germany’s expense.
“The household sector, often thought to have lost out the most in Germany due to its large net saver position, has in fact only recorded a mild loss in net interest income,” Mr. Draghi said.
Indeed, ECB policies have helped Germany and other eurozone countries by reducing the value of the euro against other currencies, thereby supporting exports, he argued.
