The economic situation is improving and the downside risks are losing strength, but it is still too early to consider phasing out the 'quantitative easing' (QE) operation, in the view of the European Central Bank.
“There is no need to discuss the sequencing of exiting QE”, the President of the ECB, Mario Draghi, said on Thursday 27 April following the meeting of the Governing Council.
The monthly pace for the purchase of mainly public securities will, as anticipated, stand at €60 billion until the end of 2017 and will continue beyond then if necessary, until such time as the inflation trajectory has sustainably reached the target level of close to but below 2%. Having stood at 2% in February, it fell back to 1.5% in the Eurozone in March. The ECB noted on Thursday that underlying inflation pressures (not including energy prices and food) remained subdued and had yet to show a convincing upwards trend.
On the other hand, the language used by the Governing Council to describe economic recovery is less pessimistic and there could be discussions on phasing out the highly accommodative monetary policy of the ECB if the trend continues.
Draghi stressed that growth was “increasingly solid”. Downside risks to Eurozone growth prospects, which are mainly related to global factors, continue to predominate, but have diminished and are moving towards a “more balanced configuration”, he added. He stressed that the Governing Council was unanimous in this position.
Protectionist risk falling
When asked about his perception of developments in the economic and budgetary policy of the Trump administration following the IMF's Spring meeting in Washington, Draghi said that the protectionist risk had somewhat diminished, but warned against reacting too soon.
The former Governor of the Bank of Italy also praised the benefits of economic globalisation. Although, he said, there is no question of stemming this movement, he recognised the need to set mechanisms in place to support those who have not benefited from the advantages of globalisation.
On Thursday, the ECB decided to keep its principal interest rates unchanged (0.00% for the principal refinancing operations, 0.25% for the marginal loan facility, -0.40% for the deposit facility) over an extended period that will continue beyond the end of the quantitative easing programme. (Original version in French by Mathieu Bion)