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22 Sep 2014
ECB's Draghi: Governing Council ready to use additional policy tools
FXStreet (Łódź) - Giving his quarterly testimony before the Committee on Economic and Monetary Affairs of the EU Parliament in Brussels, ECB head Mario Draghi stressed that the Eurozone economic recovery has been slowing down of late and that risks are tilted to the downside.
The ECB head said that the policy measures announced at the central bank's September meeting are meant to complement those introduced in June and reiterated that the lower bound on interest rates has already been reached.
Nevertheless, the ECB is ready to use additional unconventional monetary tools within their mandate "and alter the size and/or the composition of unconventional interventions should it become necessary to further address risks of a too prolonged period of low inflation," Mario Draghi assured.
On the topic of the TLTRO operations, which came into effect this month, the ECB head said that the first take-up, evaluated by markets as disappointing, was within the range expected by the central bank. The next tender is coming in December and then both operations can be assessed together.
The impact of the first TLTRO on financial markets is already visible but it's difficult to say at the moment how will it influence the economy, Draghi remarked.
As far as the ABS purchases are concerned, Draghi signaled that the ECB plans to buy senior and guaranteed mezzanine tranches. "Regarding senior securities, we would buy only those assets that are eligible for Eurosystem operations," he said. The ABS market should grow as a result of ECB's intervention and the central bank's balance sheet should move toward 2012 highs thanks to the combination of measures.
The ECB head stressed however that ECB policy must be complemented by Member States' structural reforms to be effective.
During the Q&A part of the press conference Mario Draghi said that a very modest improvement in Eurozone credit conditions is becoming apparent although AQR and stress tests may have caused contraction in credit flows.
Some Eurozone Member States should give priority to productive investment, Draghi said. He added that EU fiscal rules can be flexible but undermining them would mean undermining confidence in the area.
The ECB head said that the policy measures announced at the central bank's September meeting are meant to complement those introduced in June and reiterated that the lower bound on interest rates has already been reached.
Nevertheless, the ECB is ready to use additional unconventional monetary tools within their mandate "and alter the size and/or the composition of unconventional interventions should it become necessary to further address risks of a too prolonged period of low inflation," Mario Draghi assured.
On the topic of the TLTRO operations, which came into effect this month, the ECB head said that the first take-up, evaluated by markets as disappointing, was within the range expected by the central bank. The next tender is coming in December and then both operations can be assessed together.
The impact of the first TLTRO on financial markets is already visible but it's difficult to say at the moment how will it influence the economy, Draghi remarked.
As far as the ABS purchases are concerned, Draghi signaled that the ECB plans to buy senior and guaranteed mezzanine tranches. "Regarding senior securities, we would buy only those assets that are eligible for Eurosystem operations," he said. The ABS market should grow as a result of ECB's intervention and the central bank's balance sheet should move toward 2012 highs thanks to the combination of measures.
The ECB head stressed however that ECB policy must be complemented by Member States' structural reforms to be effective.
During the Q&A part of the press conference Mario Draghi said that a very modest improvement in Eurozone credit conditions is becoming apparent although AQR and stress tests may have caused contraction in credit flows.
Some Eurozone Member States should give priority to productive investment, Draghi said. He added that EU fiscal rules can be flexible but undermining them would mean undermining confidence in the area.