Mario Draghi has launched a staunch defence of the ECB’s aggressive monetary easing in a fresh bid to counter criticism of the policy.
The ECB president signalled last week that his central bank was prepared to cut rates and expand its landmark quantitative easing programme, saying policymakers would “review and possibly reconsider” at their next policy meeting in March in the face of the slide in oil prices and China-led slowdown in emerging markets.
Mr Draghi said borrowing costs in the euro zone had fallen by 80 basis points since the ECB launched its credit easing package in 2014 – a reduction he said would have taken a 100 basis point interest rate cut to achieve.
“What this shows is that, even when rates are at zero, we can achieve the effect of a sizeable rate cut through unconventional measures,” he said.
Global economic conditions have worsened since December, when the ECB last cut one of its benchmark interest rates – the deposit rate – to a new low and extending its QE programme for another six months to March 2017.
The ECB hopes the measures will lift euro zone inflation from its current 0.2 per cent towards its target of just under 2 per cent.
Germany’s economic and political elite is resistant to more action by the ECB – especially buying other euro zone governments’ bonds.
Mr Draghi defended the bank’s decision to cut rates to record lows and buy financial assets, saying that the bigger risk was “doing nothing”. Copyright The Financial Times Limited 2016
