ECB head says willing to ‘step up pressure’ to stimulate economy

PanARMENIAN.Net - European Central Bank head Mario Draghi says the eurozone's chief monetary authority is willing to "step up the pressure" and broaden its efforts to stimulate the struggling economy, the Associated Press reports.

Draghi said Friday, Nov 21, at a banking congress in Frankfurt, Germany that if current efforts do not achieve the desired effect the ECB could "broaden even more the channels through which we intervene."

The ECB has already lowered its benchmark interest rate to near zero and started purchasing bonds made up of bank loans to companies — an effort to boost lending and economic activity. Draghi said the bank could alter "the size, pace and composition of our purchases."

Some economists think the bank could widen the bond purchases to include corporate or government bonds in an effort to pump newly created money into the financial system — so-called quantitative easing, or QE. The U.S. Federal Reserve, Bank of Japan and Bank of England have made such purchases to stimulate growth.

The ECB has held off because bond purchases are legally and politically more complicated in a multi-country currency union. The measure also faces resistance in Germany, the eurozone's largest member. Some officials and economists say more central bank stimulus would only take pressure off governments to make pro-growth reforms, and that bond purchases could unfairly stick German taxpayers with any losses in case of default. The bank's governing council meets on Dec 4, though economists have tended to expect any additional stimulus to be decided early next year, the AP says.

The central bank is trying to raise the rate of annual inflation, currently only 0.4 percent. That is a sign of economic weakness and has raised fears the 18 countries that use the euro will remain stuck in a prolonged period of low growth and high unemployment.

"We will do what we must to raise inflation and inflation expectations as fast as possible," Draghi said in his speech at the European Banking Congress.

The eurozone grew only 0.2 percent in the third quarter, and recent economic indicators for future growth have been downbeat. Unemployment is 11.5 percent.