The European Central Bank will keep interest rates low and stands ready to take additional unconventional policy actions if inflation expectations do not pick up, ECB President Mario Draghi said yesterday.
In a speech to university students in Rome, Draghi said the ECB’s combination of ultra-low interest rates and balance sheet expansion had created “an unprecedented degree of monetary accommodation”.
Echoing his comments after last week’s ECB policy meeting, he said the ECB would take “further unconventional policy actions should medium-term inflation expectations worsen or if the measures already decided on prove to be insufficient”.
Draghi stressed that eurozone interest rates across all maturities were now “lower than they have ever been and also lower than in the United States, which we are often compared with”.
But he said monetary policy on its own could only do a limited amount and for the effects to be felt in the real economy, banks had to do more to help lending. Governments also had to encourage investment and make the structural reforms needed to improve competitiveness and cut unemployment.
“It is clear both demand- and supply-side policies are necessary,” he said, noting private investment in the eurozone had fallen by 15 per cent since 2007 and public investment by 12 per cent.