The ECB has left interest rates unchanged and confirms an accommodating policy with long-term low rates, unchanged or below current levels. And she then said she was ready to act with an artillery of tools at her disposal.
“Analysis and information confirmed our monetary policy decision from last month,” Mario Draghi said during the usual press conference following the interest rate decision. The president of the Eurotower recalled how differences emerged on the timing of the rate cut during the last meeting but said that the decision proved to be justified and that the forward guidance worked. This has been seen, Draghi said, in different indicators (yields have decreased, emissions have increased, for example). Of course, he specified, "the greater the deleveraging process that banks and private balance sheets have to carry out, the longer it will take, for all the effects of monetary policy to be seen, and the asset quality review will help shorten the time".
On the macro front, the ECB has slightly improved its forecasts for growth in the Eurozone: now its economists expect a 2013 of -0,4% for 2013, 1,1% for 2014 and 1,5% for 2015. In September the estimates were -0,4% for 2013 and +1% for 2014.
Draghi confirmed that monetary policy will remain accommodative and that the ECB is ready to act with a range of tools that are technically ready. “We have a powerful artillery of tools – assured Draghi, specifying that “we have not identified a specific one at the moment and we have talked about the possibility of negative deposit rates but only briefly”. The reflection of the ECB also concerns the possibility of not sterilizing at least in part the purchases of government bonds made by the central bank between 2010 and 2102. On the other hand, the president of the ECB underlined that it is premature to speculate now on possible actions futures. Even if he wanted to clarify that in the case of a new measure similar to Ltro "we will have to ensure that it is used to support the economy" and not to buy BTPs. The road taken by FLS, an LTER anchored to business financing as done in the UK, still seems to be uphill due to the complexity of its implementation in a context made up of various national states. In any case, Draghi recalled that when the Ltro was launched, the situation was very different and the 'Ltro was successful in avoiding a severe and further credit crunch.
In terms of the macroeconomic scenario, the pressure on prices is seen as weak in the medium term while in the medium-long term it continues to remain below the 2% target. For the ECB we could thus experience a period of low inflation followed by a gradual upward movement towards 2%. Draghi also sees many differences between the situation in the current Eurozone and that of Japan in the XNUMXs: for example, the situation of the balance sheets of banks and individuals is not comparable, we are about to start an asset quality review which will contribute to greater confidence in the system , euro countries have made progress in structural reforms.
However, governments must not let their guard down. “In particular, consolidation measures must favor growth and have a medium-long term perspective by minimizing the distortive effects of taxation. At the same time, there is a need to push product and labor market reforms to increase competitiveness, increase growth potential and generate employment opportunities by supporting the adaptability of our economies”.
On the foreign exchange front, Draghi specified that the euro exchange rate is a "source of common interest" as it influences price stability and growth, but not a monetary policy objective.
Finally, on the possible impacts of the Fed's tapering, Draghi recalled how in June the announcement of the slowdown in stimuli had caused a limited repercussion while stronger in emerging countries and that this may have generated a repricing that could repair the euro area from consequences of tapering.
