European Central Bank President Mario Draghi said the euro area economic recovery is proceeding along its solid and broad-based path despite prominent uncertainties linked to the global trade such as the threat of protectionism.
“The underlying strength of the economy confirms our confidence that the sustained convergence of inflation to our aim will continue in the period ahead and will be maintained even after a gradual winding-down of our net asset purchases,” Draghi said in the introductory statement to his customary post-decision press conference on Thursday.
“Nevertheless, significant monetary policy stimulus is still needed to support the further build-up of domestic price pressures and headline inflation developments over the medium term.”
Earlier, the ECB Governing Council maintained its interest rates, asset purchases and forward guidance.
In June, the ECB announced that it hopes to halve its monthly bond purchases to EUR 15 billion after September and to end them in December.
Draghi noted that “uncertainty around the inflation outlook is receding.”
While, the risks to the euro area growth outlook were broadly balanced, “the risk of persistent heightened financial market volatility continues to warrant monitoring,” he said.
During the Q&A session, Draghi said the ECB’s forward guidance has been very effective and policymakers saw no need to modify the language.
“Patience, prudence and persistence are still the key words informing and inspiring our monetary policy,” the ECB Chief said.
He also said that the Governing Council did not discuss reinvestment of capital from maturing securities bought in the asset purchase scheme.
“But the capital key remains our anchor,” Draghi said.
The ECB stands ready to adjust all of its instruments as appropriate to ensure that inflation continues to move towards the Governing Council’s inflation aim in a sustained manner, Draghi added.
Exactly six years ago, Draghi had said ECB was ready to do “whatever it takes” to preserve the euro. The ECB, under his leadership, has been successful in doing so thus far.
Responding to reporters’ questions regarding the trade deal struck between US President Donald Trump and the European Commission Chief Jean-Claude Juncker on Wednesday, Draghi said it was too early to assess its impact.
However, it was a good sign as it showed the willingness of both sides to engage in dialogue, Draghi said.
With reference to allegations that the ECB was keeping the euro low to benefit euro area exports, Draghi reiterated that “the exchange rate is not a policy target.”
He reminded that there has been an international consensus for decades to refrain from competitive devaluations.
“A trade war where you have rounds of retaliation and responses would create an entire different climate,” Draghi warned.