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updated: 2/5/2018 11:59 AM

Draghi: too early to call time on money-printing stimulus

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  • FILE - In this Thursday, Dec. 14, 2017 file photo, President of the European Central Bank Mario Draghi speaks during a news conference in Frankfurt, Germany. Draghi says it's too soon to declare victory over weak inflation - indicating it's too early to set a definite end date for the bank's money-printing stimulus despite a strengthening economy.

    FILE - In this Thursday, Dec. 14, 2017 file photo, President of the European Central Bank Mario Draghi speaks during a news conference in Frankfurt, Germany. Draghi says it's too soon to declare victory over weak inflation - indicating it's too early to set a definite end date for the bank's money-printing stimulus despite a strengthening economy.
    Associated Press

 
 

FRANKFURT, Germany -- European Central Bank head Mario Draghi said Monday that it's too soon to declare victory over weak inflation - indicating it would be premature to set a definite end date for the bank's money-printing stimulus despite a strengthening economy.

Draghi's statement to a session of the European Parliament in Strasbourg, France, said that continuing economic growth means inflation would eventually tick up toward the bank's goal of just under 2 percent, from an annual 1.3 percent in January.

"While our confidence that inflation will converge towards our aim of below, but close to, 2 percent has strengthened," Draghi said, "we cannot yet declare victory on this front."

Draghi accordingly offered no hint of any change in the bank's statement that it would continue purchasing 30 billion euros ($37 billion) per month in bonds at least through September, and longer if necessary. The purchases pump newly created money into the economy, driving down longer-term interest rates in an effort to raise inflation and growth.

The ECB head said that "overall, while we can be more confident about the path of inflation, patience and persistence with regard to monetary policy is still warranted for underlying inflation pressures to build up and inflation to converge durably towards our objective. "

An end to the purchases would eventually mean higher long-term borrowing costs for governments and companies. The ECB's stance is being closely watched in currency markets, which tend to send the euro higher against the dollar on any indication that the stimulus might come to an end. Monetary stimulus tends to lower a currency's exchange rate, while interest rate increases tend to raise the exchange rate against other currencies.

The ECB has made clear that interest rate increases will only occur well after the end of the purchases. That means the next rate increase likely won't happen until sometime in 2019. Currently, the bank's main benchmark interest rate is at a record low of zero.

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