Brussels, 25/04/2014 (Agence Europe) - In Amsterdam on Thursday 24 April, the head of the European Central Bank, Italian national Mario Draghi, said that the ECB could commit to a quantitative easing over a wide range of assets if the inflation prospects for the eurozone were to worsen. He added: “The Governing Council is committed - unanimously - to using both unconventional and conventional instruments to deal effectively with the risks of a too-prolonged period of low inflation”. Eurozone inflation stood at 0.7% in February and 0.5% in March, well below the ECB's target of inflation just below the 2% mark. Three factors may lead the ECB to take action: firstly, a deterioration in the medium-term inflation prospects. In the event of unjustified tension on the bond market, the ECB may make use of a further tightening of interest rates, including negative rates. Secondly, although the ECB has always claimed that the value of the euro was not an end in itself, the exchange rate is a factor that is increasingly important in its assessment of the prospects of stable prices. Thirdly, in the event of deterioration of the transmission of the bank's monetary policy, it may respond with a longer-term refinancing operation to encourage bank lending through an ABS purchase programme (bonds attached to assets).
An asset purchase programme “should certainly take into account the heterogeneity, the fragmentation let's call it, of our euro area system, if that is relevant for the effectiveness of the purchase programme”, said Draghi. (EL)