ECB ready to intervene should economy weaken
- 7 months ago
The ECB’s President, Mario Draghi vowed that the Bank is ready to take further action to help the economy if the outlook takes a sudden turn for the worse.
Draghi said the bank would take “all the monetary policy actions that are necessary and proportionate” in addition to steps taken at its March 7 meeting, when it extended the earliest date for rate increases and announced new cheap loans for banks.
Speaking at a conference on monetary policy held by Frankfurt’s Goethe University, Draghi said the economy of the 19 countries that use the euro faced “pervasive uncertainty” from a slowdown in global trade, while domestic demand remained robust.
He said the bank could respond to weaker than expected inflation by adjusting its timetable for interest rate increases. Right now, the ECB says rates will not rise before the end of the year.
The bank’s benchmark rate for lending to banks stands at a record low of zero.
The rate on deposits left at the ECB by commercial banks is minus 0.4%, in effect a penalty aimed at pushing banks to lend excess cash rather than let it pile up at the ECB.
The ECB uses its interest rate benchmarks to steer the cost of borrowing for banks, and, through that, borrowing costs for businesses and consumers. Lower rates should encourage borrowing and more economic activity.
Source: Smart Trend Team