Draghi Signals New Stimulus May Come This Year

Mario Draghi suggested the euro area may need fresh monetary stimulus by December as a global economic slowdown threatens the currency bloc’s recovery.

“Concerns over growth prospects in emerging markets and possible repercussions for the economy from developments in commodity markets signal downside risks to the outlook for growth and inflation,” the European Central Bank president told reporters in Malta on Thursday after a meeting of the Governing Council. “The degree of monetary-policy accommodation will need to be reviewed at our December meeting when new macroeconomic projections will be available.”

The international slowdown and a renewed decline in euro-area consumer prices has increased pressure on the ECB to step up its bond-buying program, with most economists in a Bloomberg survey already predicting that it’ll do so before year-end. The euro sank against the dollar as Draghi reiterated that the Governing Council was ready to act if needed.

Officials earlier left their key interest rates unchanged. The benchmark rate was kept at 0.05 percent and the deposit rate at minus 0.2 percent, both record lows.

More than 80 percent of economists in a Bloomberg survey from Oct. 9-15 said the ECB will eventually beef up its quantitative-easing program, which currently buys 60 billion euros ($67 billion) a month of private and public-sector debt. The plan is intended to run through September 2016 or until inflation is on a sustained path back toward the goal of just under 2 percent.

Of those economists who predicted fresh stimulus, 2 percent had forecast an announcement on Thursday, 56 percent saw one before the end of the year, and 86 percent said it’ll happen by the end of March. The ECB’s next monetary-policy meeting is scheduled for Dec. 3.

Draghi reiterated that bond purchases can be adjusted for duration, size and composition.


Dean Popplewell

Dean Popplewell

Vice-President of Market Analysis at MarketPulse
Dean Popplewell has nearly two decades of experience trading currencies and fixed income instruments. He has a deep understanding of market fundamentals and the impact of global events on capital markets. He is respected among professional traders for his skilled analysis and career history as global head of trading for firms such as Scotia Capital and BMO Nesbitt Burns. Since joining OANDA in 2006, Dean has played an instrumental role in driving awareness of the forex market as an emerging asset class for retail investors, as well as providing expert counsel to a number of internal teams on how to best serve clients and industry stakeholders.
Dean Popplewell