ECB to pump in more money if inflation stalls

 

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The Independent Online

The European Central Bank is ready to give the eurozone economy a bigger dose of stimulus should inflation across the 19-country single currency bloc fail to pick up as planned, the ECB president Mario Draghi has said.

Following the bank’s decision to keep interest rates at record lows, Mr Draghi said the ECB can add to its €1.1trn (£800bn) stimulus programme if needed to raise inflation or help the economy in the face of a global slowdown.

The ECB is pumping €60bn a month in newly printed money into the economy through purchases of government and corporate bonds. The programme is set to run at least until September 2016.

The stimulus is intended to help lift consumer price inflation back towards the ECB’s target of just below 2 per cent. In the year to August, it stood at 0.2 per cent. Mr Draghi said it could go negative in the coming months following the recent drop in oil prices.

His comments came after the ECB cut its projections for eurozone inflation this year from 0.3 per cent to 0.1 per cent and said growth was also likely to be lower than expected this year, at 1.4 per cent rather than the 1.5 per cent that had been forecast. “Overall we expect the economic recovery to continue, albeit at a somewhat weaker pace than earlier expected, reflecting in particular the slowdown in emerging market economies, which is weighing on global growth and foreign demand for euro area exports,” Mr Draghi said.

Although fears over the global economy have intensified in recent weeks, mainly due to a plunge in Chinese markets, the eurozone recovery appears to have continued during the summer as worries of a Greek exit from the euro have eased.

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