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ECB leaves door open to future rate cut
Thu, 10th Jan 2013 16:27
European Central Bank (ECB) President Mario Draghi has left the door open to future interest rate cuts after the central bank decided to stay in 'wait and see' mode at its latest monetary policy meeting.
Speaking at the press conference following the ECB meeting, Draghi insisted that the decision to keep rates on hold was unanimous and that there were no factors that warranted a change from the last meeting. He reiterated that medium-term inflation expectations remained well anchored and that he expected inflation to come in below or very close to the 2% target this year.
Constrained price pressures lead analysts to believe that a rate cut may still be in the cards.
"Risks around the economic outlook in the euro area remain on the downside," Draghi said. Nonetheless, he expressed optimism for the future, pointing out that the Eurozone's economic recovery should begin at the end of the year.
He cited several indications of improvement, such as lower sovereign debt yields, low volatility, and a reduction in the central bank's balance sheet.
Draghi explained that the real economy has not yet benefited from these improvements and that there continues to be signs of fragmentation in the Eurozone.
"You also need to see some general greater strength in the economy. The continuation of the structural reforms process, the regaining of competitiveness, the actions in the product markets, all these are factors that grant a long term improvement, not just in the financial markets," he said.
"It is essential for governments to reduce fiscal imbalances and proceed with financial restructuring," Draghi advised.
JM
Speaking at the press conference following the ECB meeting, Draghi insisted that the decision to keep rates on hold was unanimous and that there were no factors that warranted a change from the last meeting. He reiterated that medium-term inflation expectations remained well anchored and that he expected inflation to come in below or very close to the 2% target this year.
Constrained price pressures lead analysts to believe that a rate cut may still be in the cards.
"Risks around the economic outlook in the euro area remain on the downside," Draghi said. Nonetheless, he expressed optimism for the future, pointing out that the Eurozone's economic recovery should begin at the end of the year.
He cited several indications of improvement, such as lower sovereign debt yields, low volatility, and a reduction in the central bank's balance sheet.
Draghi explained that the real economy has not yet benefited from these improvements and that there continues to be signs of fragmentation in the Eurozone.
"You also need to see some general greater strength in the economy. The continuation of the structural reforms process, the regaining of competitiveness, the actions in the product markets, all these are factors that grant a long term improvement, not just in the financial markets," he said.
"It is essential for governments to reduce fiscal imbalances and proceed with financial restructuring," Draghi advised.
JM
