If the Eurozone economy doesn't improve,"further stimulation will be needed”. Which? There is no shortage of possibilities: from Quantitative easing, securities purchase programme discontinued in January of this year, which "still has a lot of room left", up to "further cuts in interest rates”, which remain a viable option despite yields already at an all-time low. The position expressed on Tuesday morning by the President of the European Central Bank is strong and clear, Mario Draghi, who spoke for the last time at theECB Forum which takes place every year in Sintra, Portugal.
“Looking to the future – explained the number one of the ECB – the risk prospects remain oriented towards the downside and the indicators for the next quarters tell us of a persistent weakness. Risks that have been evident throughout the past year – notably geopolitical factors, the growing threat of protectionism and vulnerability in emerging markets – have not dissipated. On the contrary, their persistence has weighed on exports and in particular on manufacturing”.
For this, Draghi stressed that, “in the absence of improvements, if the sustained return of inflation towards our target is jeopardized”, the ECB will have to intervene again, widening the strings of monetary policy with new expansionary measures.
“In the coming weeks – he added – the Governing Council will decide how to adapt our tools to the severity of the risks to which price stability is exposed. We maintain the ability to strengthen our forward guidance to account for changes in inflation path adjustments.
This, Draghi specified, applies to all monetary policy instruments: “Further interest rate cuts and measures to mitigate any negative effects remain among our tools, while the bond purchase programme still has considerable space left.”
The President of the ECB also spoke of the "Countries with high debt”, like Italy, which must maintain “the confidence of investors” by launching “reforms and public investments” but without violating “European fiscal rules”.
After Draghi's words, the European stock exchanges accelerated upwards (Piazza Affari +1% in mid-morning), while the euro weakened. The single currency, which stood at 1,1242 dollars before the speech (from 1,122 dollars at the close yesterday), slipped below 1,12 dollars, to 1,119. The Btp-Bund spread, on the other hand, fell from 255 to 247 basis points.
US President Trump's attack on Draghi was harsh, whom the White House accuses of "disloyalty" for having favored the euro against the dollar.
