The European Central Bank is prepared to ease policy again if the sustained return of inflation to its target is threatened, ECB President Mario Draghi said on Tuesday, suggesting further stimulus could be offered in the coming weeks.
Excerpts from Speech by Mario Draghi, President of the ECB, ECB Forum on Central Banking, Sintra, 18 June 2019:
Looking forward, the risk outlook remains tilted to the downside, and indicators for the coming quarters point to lingering softness. The risks that have been prominent throughout the past year, in particular geopolitical factors, the rising threat of protectionism and vulnerabilities in emerging markets have not dissipated. The prolongation of risks has weighed on exports and in particular on manufacturing.
In the absence of improvement, such that the sustained return of inflation to our aim is threatened, additional stimulus will be required.
In our recent deliberations, the members of the Governing Council expressed their conviction in pursuing our aim of inflation close to 2% in a symmetric fashion. Just as our policy framework has evolved in the past to counter new challenges, so it can again. In the coming weeks, the Governing Council will deliberate how our instruments can be adapted commensurate to the severity of the risk to price stability.
We remain able to enhance our forward guidance by adjusting its bias and its conditionality to account for variations in the adjustment path of inflation.
This applies to all instruments of our monetary policy stance.
Further cuts in policy interest rates and mitigating measures to contain any side effects remain part of our tools.
And the APP still has considerable headroom. Moreover, the Treaty requires that our actions are both necessary and proportionate to fulfil our mandate and achieve our objective, which implies that the limits we establish on our tools are specific to the contingencies we face. If the crisis has shown anything, it is that we will use all the flexibility within our mandate to fulfil our mandate – and we will do so again to answer any challenges to price stability in the future.
All these options were raised and discussed at our last meeting.
What matters for our policy calibration is our medium-term policy aim: an inflation rate below, but close to, 2%. That aim is symmetric, which means that, if we are to deliver that value of inflation in the medium term, inflation has to be above that level at some time in the future.
6/18/2019 9:17:09 AM