NEW YORK CITY: Mario Draghi said over the weekend that the European Central Bank (ECB) would intensify efforts to support the eurozone economy and boost inflation toward its 2 percent goal if necessary.
Speaking one day after the ECB’s moves to expand stimulus fell short of market expectations, the central bank president said that he was confident of returning to that level of inflation “without undue delay.”
“But there is no doubt that if we had to intensify the use of our instruments to ensure that we achieve our price stability mandate, we would,” he said in a speech to the Economic Club of New York.
“There cannot be any limit to how far we are willing to deploy our instruments, within our mandate, and to achieve our mandate,” he said, according to the text of his remarks.
On Thursday the ECB sent equity markets tumbling, and reversed the euro’s downward course, after it announced an interest rate cut that was less than investors had expected and held back from expanding the size of its bond-buying stimulus.
The bank cut its key deposit rate by a modest 0.10 percentage point to minus 0.30 percent, and only extended the length of its bond purchase program by six months to March 2017.
Critics said that was not strong enough action to counter deflationary pressures on the euro area economy.
Some analysts believed a desire for stronger moves, like an expansion of bond purchases, was stymied by powerful, more conservative members of the ECB governing council, including Bundesbank chief Jens Weidmann.
But Draghi insisted that there was “very broad agreement” within the council for the extent of the bank’s actions.
And, he added, it would do more if necessary: “There is no particular limit to how we can deploy any of our tools.”
He acknowledged some market doubts that central banks are proving unable to reverse the downward trend in inflation, saying that, even if there is a lag to the impact of policies in place, they are working.
“I would dispute entirely the notion that we are powerless to reach our objective,” he said.
“The evidence at our disposal shows, on the contrary, that the instruments we are currently deploying are having the effect intended.”
Without them, he added, “inflation would likely have been negative this year.”