Brussels, 21/01/2016 (Agence Europe) - The ECB has the power, the willingness and the determination to act in respect of its mandate in the teeth of the renewed volatility and uncertainty on the markets.
Since the beginning of the year, downside risks have increased again amid heightened uncertainty about emerging market economies' growth prospects, the volatility observed on the markets and geopolitical risks. These are weighing on the inflation trajectory, which continues to be “weaker than expected”, the president of the ECB, Mario Draghi, commented on Thursday 21 January, after the meeting of the Governing Council. “It will therefore be necessary to review and possibly reconsider our monetary policy stance at our next meeting in early March”, when the new macro-economic projections are available, he added. He went on to stress that the ECB is unanimous that it has the “power, willingness and determination to act” and that there are “no limits” to prevent it from achieving its mandate, specifically to keep inflation close to but below 2% in the medium term.
When asked about the considerable volatility observed on the markets, due, amongst other things, to the continued slide in oil prices and the downturn in China, Draghi said that “so far, there is no sign of potential financial instability of the scale seen in pre-crisis time”. He went on to point out that today, the banking sector is stronger than before the crisis, thanks to the reinforcement of the prudential rules, amongst other things. He said that the questionnaires regarding the management of non-performing loans which were sent to several countries's banks under the direct supervision of the ECB aimed to identify best practice, not to bring pressure to bear to tackle the issue.
The president of the ECB went on to state that the accommodative monetary policy in place since 2014 was producing positive results in terms of economic recovery, lending to the economy and improving financing conditions. He said that the decisions taken in early December to extend the “quantitative easing” programme until March 2017 and to reinvest the principal payments in securities maturing in the framework of the APP asset buy-back programme were “fully appropriate” and would inject additional liquidity into the banking sector (see EUROPE 11445).
Lastly, the ECB has kept the interest rates for principal refinancing operations (0.05%), the marginal loan facility (0.3%) and the deposit facility (-0.3%) unchanged. (Original version in French by Mathieu Bion)