ECB ready to take more policy action to revive economy if needed

European Central Bank members all stand ready to take more policy action if needed to revive a struggling euro economy and the bank's staff will prepare the groundwork, President Mario Draghi said today.

The Italian doused concerns about his leadership style, saying the whole policymaking Governing Council had signed up to a statement which confirmed previous comments he had made on the amount of money the bank aimed to pump into the economy.

The ECB kept interest rates at a record low 0.05 per cent at it monthly meeting, waiting to see how measures already in train unfold.

After the US Federal Reserve ended its bond-buying programme and the Bank of Japan increased its pace of money creation, markets are trying to judge how close the ECB is to launching more aggressive steps, such as quantitative easing money-printing to buy large amounts of government bonds.

It was reported this week that national central bankers in the euro area planned to challenge Mr Draghi over his communication style at a dinner held last night.

They were particularly concerned about his setting of an expanded balance sheet target after the Council agreed in September not to make any figure public.

Mr Draghi has now built a united front.

He reaffirmed the target, telling a news conference the balance sheet would “move towards the dimensions it had at the beginning of 2012”.

He then spelled it out more specifically, naming March 2012 as the key month, at which time the ECB balance sheet topped €3 trillion, a trillion higher than the current level.

Differences among central bankers were to be expected, Mr Draghi said, but concerns about his management style had not been raised at the dinner which focused on how to give more information on policymakers’ voting records without undermining their independence or ability to speak frankly.

“It is fairly normal to disagree about things, it happens everywhere,” Draghi said.

“The dinner went better than expected,” he said.

The ECB chief said risks to the euro zone’s recovery remained skewed to the downside and ECB and national central banks’ staff had been tasked with “ensuring the timely preparation of further measures to be implemented if needed”.

“The Governing Council is unanimous in its commitment to using additional unconventional instruments within its mandate,” he said.

The euro hit a 26-month low and peripheral European bond yields fell in response.

“Heads of national central banks can disagree all they want with him,” said Brian Jacobsen, chief portfolio strategist at Wells Fargo Funds Management. “Today’s policy statement is a resounding endorsement of Mr Draghi’s leadership.”

(Reuters)