Mario Draghi wrapped up his final monetary policy meeting at the European Central Bank by leaving interest rates unchanged and sticking to the existing package of loosening measures he announced last month.
The outgoing ECB president said he was proud of pursuing the central bank’s mandate and that policymakers should “never give up”.
The ECB had been widely expected to leave policy unchanged after it triggered a fierce debate last month by cutting interest rates to minus 0.5 per cent and restarting its quantitative easing programme to purchase bonds following a 10-month hiatus.
The central bank’s governing council said in a statement: “The governing council expects the key ECB interest rates to remain at their present or lower levels until it has seen the inflation outlook robustly converge to a level sufficiently close to, but below, 2 per cent within its projection horizon, and such convergence has been consistently reflected in underlying inflation dynamics.”
In a press conference after the announcement, Mr Draghi called on eurozone governments to enact reforms to improve productivity and labour markets and to use fiscal policy to further stimulate the bloc’s economy.
“All countries should intensify their efforts to achieve a more growth-friendly composition of public finances,” he said.
Mr Draghi added that the global economic paradigm had recently changed and policymakers at the IMF and elsewhere now accepted that interest rates would remain low for a long time to come.
Frederik Ducrozet at Pictet Wealth Management said Mr
Draghi had become “the first president to leave the ECB without ever having raised interest rates”, adding that he had cut rates eight times, never increased them, and doubled the size of the ECB’S balance sheet by buying bonds.
Mr Draghi’s successor Christine
Lagarde attended the meeting, although she did not participate in the discussions. Mr Draghi said she “needs no advice” on how to do the job.
The central bank’s decision to hold fire in the final meeting of its governing council before Mr Draghi hands over to Ms Lagarde late next week came amid more gloomy signs for the eurozone economy.
The latest eurozone business sentiment survey, published earlier on Thursday, showed a slight month-on-month rise in October but remained only just above the 50 mark that separates growth from contraction.
Eurozone inflation last month fell to a three-year low of 0.8 per cent, well below the ECB’S target of below but close to 2 per cent, and was likely to fall further in the final quarter of the year, Mr Draghi said. Earlier this week, the Bundesbank warned that a slide in German manufacturing and exports may have dragged the country into recession in the third quarter.
Recent data reinforced the ECB’S assessment of the economic risks as trade-related woes had damped investment growth, said Mr Draghi, although areas such as the services sector and wage growth continued to underpin the eurozone economy.
He defended the ECB’S recent loosening measures, saying they were needed in response to a sharp drop in economic growth that had caused inflation to fall even further below the central bank’s core objective.