Mario Draghi speech: ECB president hints at use of more unconventional instruments in fight against low inflation
The euro has fallen against the dollar after a doveish Draghi spoke before the Committee on Economic and Monetary Affairs of the European Parliament.
Consumer confidence for the single currency bloc was underwhelming at -11.4, falling short of an already bearish consensus of -10.75.
In his speech the president of the European Central Bank (ECB) indicated that the Bank will continue to use the monetary tools at its disposal to fight disinflation, high unemployment and low growth:
we stand ready to use additional unconventional instruments within our mandate, and alter the size and / or the composition of our unconventional interventions should it become necessary to further address risks of a too prolonged period of low inflation.
The ECB has already lowered interest rates (effectively) past the zero bound, and have announced the purchase of asset backed securities.
Draghi used stark terms to descibe the economic situation in the Eurozone:
The economic recovery in the euro area is losing momentum. Following some moderate expansion in recent quarters, growth of the euro area real GDP came to a halt in the second quarter of this year.
The early information on economic conditions which we received over the summer has been somewhat weaker than expected. While industrial production and manufacturing orders in July gave some reason for optimism, more recent survey indicators have given no indication that the sharp decline registered in August has stopped.
He also mentioned the weak nature of inflation (0.4 per cent annualised) and "unnaceptably" high unemployment.
At the time of writing the euro had fallen to 1.2825, the lowest it has been since July last year. The negative interest rates are expected to cause the euro to fall, helping to increase exports.
