Here are the most salient points of Mario Draghi’s press conference after the monetary committee of the European Central Bank:
- ECB interest rates remain unchanged. The refi rate is at 0% and the deposit facility rate at -0.4%. Mario Draghi said in his introduction that the ECB expect them to stay at current or at lower levels for an extended period of time.
- Negative interest rates have had positive effects on financial conditions
- Interest rates will be higher only when growth and inflation will be higher
- Current outlook on economic activity is stronger but it is not enough yet
- The inflation situation is not as dire as before but “now we have to be patient”. “We have to wait” as it was said buy the ECB president
- On a shorter view, Mario Draghi expects a negative inflation rate in coming months but a positive one in the second half of this year. At this time, the comparison with 2015, for the oil price, will be more favourable.
- The main point in the ECB action is to remain proactive, as it has been last March and before, to avoid a spillover of low inflation on wage and price settings. The risk of deflation would then be high.
- The ECB has not discussed the possibility of helicopter money. Draghi has not even discussed this possibility
- M. Draghi said that during the last four years, the ECB monetary policy was the only policy that has adopted a pro-growth profile.
- He said that the ECB was dependant on law not on politicians. He wanted to reaffirm the ECB independence after allusion from politicians in recent weeks.
Mario Draghi is waiting for the effects on its monetary policy on the economic activity and on the inflation rate. A lot of measures have been taken in recent months and specifically last March and they haven’t developed all their power yet. It will take time as the global environment is not supportive and cannot be a spontaneous support for the Euro Area.
The ECB has decided to maintain its accommodative stance on monetary policy. Therefore, interest rates will remain low for an extended period. Mario Draghi has not not excluded lower rates even if it’s not a issue now. The current stance is a pause.
The ECB has given details on the purchase of corporate assets. 5 points to keep in mind:
- The asset is not from a bank or from a company owned by a bank
- But a paper issued by a company that owned a bank is eligible
- The paper has to be issued in euro
- The maturity of the paper will be between 6 months and 30 years
- The ECB will be able to intervene on the primary or/and the secondary markets.
Philippe Waechter, Chefökonom, Natixis Global Asset Management