Draghi Sees Economy Recovering as ECB Rates Left on Hold

European Central Bank President Mario Draghi said the euro-area economy will return to growth by the end of the year, handing policy makers a reason to hold back fresh stimulus.

“Euro-area economic activity should stabilize and recover in the course of the year, albeit at a subdued pace,” Draghi told reporters in Frankfurt today. “We will monitor very closely all incoming developments and we stand ready to act.”

Draghi spoke after the ECB’s Governing Council left its main refinancing rate at 0.5 percent after reducing it by a quarter point last month. The decision was predicted by 57 of the 59 economists in a Bloomberg News survey. The euro climbed to a four-week high against the dollar and Germany’s two-year note yield rose to the highest level since February.

An improvement in sentiment is giving Draghi time to consider a menu of further measures that the ECB may deploy to aid the 17-nation economy, now in its longest recession since the euro began trading in 1999. Among the options he cited: Cutting the so-called deposit rate into negative territory, lending more money to banks, easing collateral rules, reviving the market for asset-backed securities and providing investors with greater guidance on how long borrowing costs will stay low.

“We have a range of different instruments,” said Draghi. Economic data since the ECB’s meeting last month “were not enough to grant immediate action,” he said.


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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