JAKARTA (TheInsiderStories) – In his latest meeting, president European Central Bank (ECB) Maria Draghi decided left its policy mix unchanged. The central bank cut its interest rates further below zero and restart a Euro2.6 trillion ($2.89 trillion) bond-buying program starting Nov. 1.
“We decided to keep the key ECB interest rates unchanged. We expect them to remain at their present or lower levels until we have seen the inflation outlook robustly converge to a level sufficiently close to, but below, 2 percent within our projection horizon, and such convergence has been consistently reflected in underlying inflation dynamics,” said Draghi after the Governing Council, also attended by the incoming president, Christine Lagarde, on Thursday (10/25)
On the bond-buying program, he expectto run for as long as necessary to reinforce the accommodative impact of the central bank policy rates, and to end shortly before start to raise the key interest rates. The Governing Council’ forward guidance will ensure that financial conditions adjust in accordance with changes to the inflation outlook.
In any case, he explained, the Governing Council continues to stand ready to adjust all of its instruments, as appropriate, to ensure that inflation moves towards its aim in a sustained manner, in line with its commitment to symmetry. Its expecting, the decision will support the euro area expansion, the ongoing build-up of domestic price pressures and, thus, the sustained convergence of inflation to our medium-term inflation aim.
According to him, Euro area real GDP growth was confirmed at 0.2 percent on quarterly basis (QoQ), in the second quarter (2Q) of 2019, following a rise of 0.4 percent in the previous quarter. He adds, incoming economic data and survey information continue to point to moderate but positive growth in the second half of this year.
“This slowdown in growth mainly reflects the ongoing weakness of international trade in an environment of persistent global uncertainties, which continue to weigh on the euro area manufacturing sector and are dampening investment growth,” said Draghi.
He continued, Euro area annual inflation decreased from 1.0 percent in August 2019 to 0.8 percent in September, reflecting lower food and energy price inflation. On the basis of current futures prices for oil, headline inflation is likely to decline slightly further before rising again at the end of the year.
While, labour cost pressures have strengthened amid tighter labour markets, the weaker growth momentum is delaying their pass-through to inflation. Over the medium term inflation is expected to increase, supported by our monetary policy measures, the ongoing economic expansion and robust wage growth, he stated.
Regarding fiscal policies, Draghi sees, the mildly expansionary euro area fiscal stance is currently providing some support to economic activity. In view of the weakening economic outlook and the continued prominence of downside risks, governments with fiscal space should act in an effective and timely manner.
“In countries where public debt is high, governments need to pursue prudent policies and meet structural balance targets, which will create the conditions for automatic stabilisers to operate freely. All countries should intensify their efforts to achieve a more growth-friendly composition of public finances,” he asserted.
by Linda Silaen, Email: email@example.com