The European Central Bank (ECB) will maintain its monetary policy, while claiming to be “ready” to use the instruments at its disposal to deal with all eventualities, Mario Draghi, the institution's President, told the press following the Governing Council meeting on Wednesday 10 April.
Unsurprisingly, the ECB has indicated that it will keep its key rates unchanged until the end of 2019. This confirms Mr Draghi's statement at the beginning of March, that these rates were justified by the fact that the inflation trend has not returned to a level close to (but below) 2% (see EUROPE 12209/15). In March, annual inflation rate in the euro area stood at 1.4%, according to the Statistical Office of the European Union (Eurostat) (see EUROPE 12226/24).
The ECB's key rates are currently 0.00% for the main refinancing operations, 0.25% for the marginal lending facility and -0.40% for the deposit facility.
The ECB will also examine whether maintaining negative interest rates “requires the mitigation of their possible side effects”, Mr Draghi said.
When asked about this, however, he indicated that there had been no discussion on palliative measures for the possible side effects of a negative deposit facility rate.
“We said that we want to analyse the side effects and possibly the mitigating measures (…) we are not even discussing the first stage of this reasoning, not to mention what this would imply”, he explained.
As was also decided last month, the monetary institute intends to continue reinvesting until the key rates are raised, as the amounts of bonds purchased as part of the massive quantitative easing (QE) operation are maturing.
“The Governing Council stands ready to adjust all of its instruments” to support inflation convergence, Draghi added.
Moreover, the President of the Monetary Institute did not detail the measures taken through the targeted longer-term refinancing operations (TLTRO).
In addition, he mentioned, in order to justify the choices made by the Monetary Institute, the risks to the European economy, such as geopolitical tensions or protectionism.
And for him, the slowdown in growth is “expected to extend into the current year” (see EUROPE 12189/1). However, he added that the economic expansion of the euro area would continue to be supported by several factors, including rising wages, employment levels and favourable financing conditions.
The need for States to continue and accelerate efforts in the implementation of structural reforms and the consolidation of public finances was also highlighted.
Brexit. Asked about Brexit, the President of the Monetary Institute also pointed out the uncertainties that this poses for the economy of the euro area. In his view, particular attention should be paid to the consequences of Brexit on the real economy. “If you take aggregate number, you would not expect a major impact given the relative size of the two entities”, he explained.
Mr Draghi noted that some Member States are highly exposed to the British economy, that this could have serious consequences and even have repercussions on the rest of the continent. He also warned of the consequences of a break in value chains between the United Kingdom and the EU, but still hoped that this could be avoided. (Original version in French by Marion Fontana and Lucas Tripoteau)