“The bulk of the decisions will probably be made in October” regarding the phasing-out of the 'quantitative easing' operation of the European Central bank (ECB), its President, Mario Draghi, announced on Thursday 7 September.
Due to their complexity, discussions on this dossier are at an extremely preliminary stage, Draghi said, although the monetary institute's Governing Council has already started to look at several scenarios concerning the pace and duration of the QE exit phase.
In any event, the ECB will continue to purchase mainly sovereign securities at a monthly pace of €60 billion up to the end of 2017 or even beyond, if it notes that the inflation trajectory remains too low compared to its principal mission of increasing prices at a level of close to but below 2%. On Thursday, the ECB is reported not to have discussed a possible drying-up on the markets of financial securities eligible for QE.
Draghi notes that economic recovery in the Eurozone is consolidating. The monetary institute has therefore increased its growth forecasts for 2017 compared to June. Growth is expected to stand at 2.2% of GDP in 2017, 1.8% in 2018 and 1.7% in 2019. However, its forecasts for inflation, which stood at 1.5% in August, have been tweaked downwards slightly: the increase in prices is expected to stand at 1.5% in 2017, 1.2% in 2018 and 1.5% in 2019.
The former President of the Bank of Italy called for perseverance in monetary policy and patience in waiting for the policy's effects to materialise. The improved health of the Eurozone economy is certainly a positive influence on consumption and job creation, but the war on unemployment has not yet been won and wage increases - the main clause of inflation, Draghi stressed - are too modest to trigger any automatic increase in prices.
Under these circumstances, the ECB decided once again on Thursday to keep its main interest rates unchanged (0.00% for principal refinancing operations, 0.25% for the marginal loan facility, -0.40% for the deposit facility) over a period to extend beyond the end of the QE operation. (Original version in French by Mathieu Bion)