Risks to the European Central Banks (ECB) outlook for economic growth and inflation have worsened since the mid-August cut-off point for the new projections it published on 3 September 2015, according to Mario Draghi. The ECB president made the revelation to a journalist after the banks monthly meeting today (3 September). The ECB left interest rates unchanged as the chances of missing its medium-term inflation target grow due to lower oil prices, weaker growth in China and an appreciating euro.
The governing council will closely monitor all relevant incoming information. It emphasised its willingness and ability to act if warranted by using all the instruments available within its mandate, and in particular recalls that the asset-purchase programme provides sufficient flexibility in terms of adjusting the size, composition and duration of the programme. In the meantime, we will fully implement our monthly asset purchases of 60 billion euros, Draghi said at a news conference in Frankfurt. He added that economic recovery was expected to continue but at a weaker pace than earlier expected.
Downside risks have increased and emerging market economies challenges are unlikely to be quickly reversed, Draghi told journalists, saying that the cut-off date for the projections was last month on 12 August. The events that took place since then are a downside risk to the projections themselves.
Lower commodity prices, a stronger euro and somewhat lower growth would have increased the risk to a sustainable path of inflation towards 2%, Draghi added. The president also said that the possible negative numbers of inflation during the coming months would be transitory effects, mostly related to oil-price effects. However, as I said before, we will closely monitor all incoming information. And the governing council wanted to emphasise in the discussion we had today its willingness to act, its readiness to act and its capacity to act, its ability to act, he said.
