Thursday, July 4, 2013

Draghi Says ECB Will Remain Easy ‘For As Long as It Takes’
In his introductory statement during today’s press conference, ECB President Mario Draghi said that the bank’s official rate would remain at 0.5%. This time, instead of saying that the ECB will do “whatever it takes” to support the euro zone’s currency and economy, he pledged easy money “for as long as necessary.” This is what he actually said:
Looking ahead, our monetary policy stance will remain accommodative for as long as necessary. The Governing Council expects the key ECB interest rates to remain at present or lower levels for an extended period of time. This expectation is based on the overall subdued outlook for inflation extending into the medium term, given the broad-based weakness in the real economy and subdued monetary dynamics.
He stated that the risks for the euro zone economy remain on the downside:
The recent tightening of global money and financial market conditions and related uncertainties may have the potential to negatively affect economic conditions. Other downside risks include the possibility of weaker than expected domestic and global demand and slow or insufficient implementation of structural reforms in euro area countries.
He must have been pleased to report that financial conditions have improved significantly in the euro zone:
Since the summer of 2012 substantial progress has been made in improving the funding situation of banks and, in particular, in strengthening the domestic deposit base in a number of stressed countries. This has contributed to reducing reliance on Eurosystem funding, as reflected in the ongoing repayments of the three-year longer-term refinancing operations (LTROs). In order to ensure an adequate transmission of monetary policy to the financing conditions in euro area countries, it is essential that the fragmentation of euro area credit markets continues to decline further and that the resilience of banks is strengthened where needed. Further decisive steps for establishing a Banking Union will help to accomplish this objective. In particular, the future Single Supervisory Mechanism and a Single Resolution Mechanism are crucial elements for moving towards re-integrating the banking system and therefore require swift implementation.

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