ECB’s Draghi Believes the ECB Policy is Potent

Mario Draghi said the European Central Bank’s non-standard measures have proven effective, and low interest rates haven’t yet led to financial imbalances.  Unconventional actions “have proven so far to be potent, more so than many observers anticipated,” the ECB president said in a speech in Washington. “While a period of low interest rates will inevitably result in some local misallocation of resources, it does not follow that it has to threaten overall financial stability” and “there is little indication that generalized financial imbalances are emerging,” he said.

The ECB cut its benchmark interest rate to a record-low 0.05 percent in September and has relied on a range of non-standard stimulus to resuscitate the 19-nation economy. Policy makers have provided banks with loans designed to fuel credit supply and started buying government bonds in March, while urging governments to push ahead with structural reforms.

“Structural reforms that increase confidence in economic prospects and encourage entrepreneurs to capitalize on today’s extremely accommodative financing conditions will make our policy commensurately more powerful,” Draghi said in his speech on Thursday.

Bloomberg

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