FRANKFURT: European Central Bank President Mario Draghi opened the door yesterday to an interest rate cut as soon as next month, saying his bank stands “ready to act” to boost the recession-hit eurozone economy.
Speaking at a news conference after the ECB held rates at a record low 0.75 percent, the highest level among the world’s major central banks, Draghi said discussion at the monthly meeting had been extensive and the consensus was to hold fire.
But he added that the ECB was studying the economic climate closely because there was no certainty the euro zone economy would pick up.
“In the coming weeks, we will monitor very closely all the incoming information on economic and monetary developments, and assess the impact on the outlook for price stability,” he said. Draghi’s predecessor, Jean-Claude Trichet, used a stock of coded phrases to signal future policy actions something his successor has not previously indulged in. One of those phrases was “monitor very closely” although in the Frenchman’s era it more often presaged an interest rate rise two months’ hence.
Draghi also opened the way for the ECB to take fresh ‘non-standard measures’ — steps other than classic rate moves, such as government bond purchases or funding operations like the twin 3-year loans it offered banks just over a year ago.
“We are considering both standard and non-standard measures and we are thinking 360 degrees on the non-standard measures,” he said.
German government bond and eurozone interest rate futures extended gains with market participants saying Draghi’s comments laid the ground for a rate cut in coming months.
“In a nutshell, a rate cut or additional non-standard measures cannot be ruled out in May,” said Annalisa Piazza at Newedge Strategy.
The ECB is mandated to deliver inflation just below 2 percent. In March, it fell to 1.7 percent. Draghi said inflation was “edging down, well below 2 percent”.
A survey released earlier yesterday showed the eurozone’s economic decline dragged on unabated in March, marked by a huge drop in French business activity that outstripped even the downturns in Spain and Italy.
Reuters
