The Governing Council of the European Central Bank has called upon its services to reassess the monetary policy instruments in place, in particular the quantitative easing (QE) programme for the mass buyback of securities, mainly public ones.
"We have tasked our various committees with reassessing the monetary policy tools and working on any changes necessary to ensure a harmonious implementation of the programme" [quantitative easing], said the president of the ECB, Mario Draghi. The QE programme "is working", he stressed.
Quantitative easing, which was launched in March 2015, has bought back more than €1 trillion worth of mainly public securities. Its term has been extended, from September 2016 to March 2017, and its cover broadened to include the debt instruments of private businesses with high financial ratings (see EUROPE 11445). The issue is that the ECB may struggle to find securities to buy on the market, particularly from German entities. It may extend the programme further or expand its scope of intervention (increasing the intervention threshold and the number of shares that can be held in a single entity, incorporate new entities, or give priority to entities from countries in greater difficulties).
Draghi feels that developments in the economic situation in the eurozone are not substantial enough at this stage to require an immediate change to the non-conventional monetary policy instruments. However, the former President of the Bank of Italy went on to stress that the ECB stood ready to make use of all instruments available to it in order to comply with its mandate: bringing inflation back down to a level close to but below 2% in the medium term.
Growth forecasts adjusted downwards a touch
The monetary institute has slightly trimmed its eurozone growth forecasts compared to its position in June. GDP growth will continue at a steady pace: 1.7% in 2016 and 1.6% in 2017 and 2018. Draghi anticipates that the third quarter of 2016 will be more or less identical to the previous quarter, which saw growth of 0.3% in the eurozone.
As regards inflation, the European institution's forecasts remain largely unchanged. Annual price increases will start to take off again at the end of 2016, to then accelerate to reach 1.2% in 2017 and 1.6% in 2018.
To underpin his conviction that the ECB's policy is working, Draghi stressed the highly positive knock-on effects this policy has had for non-financial entities, in particular the extremely low borrowing rates for companies and households. "The fragmentation is over", he said, in reference to the differences in borrowing rates facing businesses at the peak of the sovereign debt crisis depending on which country of the eurozone they were established in.
Calling for the structural reforms to continue, Draghi also expressed his approval of the fact that the Juncker investment plan will be continued beyond 2018.
Finally, the ECB decided on Thursday to keep the interest rates unchanged for principal refinancing operations (0.00%), the marginal loan facility (0.25%) and the deposit facility (-0.40%). These rates will remain low for a prolonged period and for as long as necessary. (Original version in French by Mathieu Bion)