ECB president Mario Draghi has urged governments to do more to improve economic performance rather than relying on monetary policy, as the central bank makes no changes to rates in its latest monetary policy decision.
The lack of movement on the ECB’s existing range of monetary policy measures was widely expected by markets as the central bank takes a wait-and-see approach to its existing policies announced on 10 March.
IHS Global Insight chief UK and European economist Howard Archer describes it as “one of the most predictable ECB meetings for some time”.
Since March, the central bank has kept the interest rate on the main refinancing operations, the interest rates on the marginal lending facility and the deposit facility unchanged at zero, 0.25 per cent and -0.4 per cent respectively.
June is a significant month for Eurozone monetary stimulus with the ECB launching its corporate bond buying and targeted long-term refinancing operations, also announced in March.
In a press conference following the announcement of the governing council’s decision, Draghi said: “In order to reap the full benefits from our monetary policy measures, other policy areas must contribute much more decisively, both at the national and at the European levels.”
The ECB’s “accommodative monetary policy” needed support from structural and fiscal policy, he said.
“The focus should be on actions to raise productivity and improve the business environment, including the provision of an adequate public infrastructure, which are vital to increase investment and boost job creation.”
“The economic recovery in the euro area continues to be dampened by subdued growth prospects in emerging markets, the necessary balance sheet adjustments in a number of sectors and a sluggish pace of implementation of structural reforms.”
Today’s decision is the last before the UK’s referendum on its membership of the EU.
Deputy CIO at Brown Shipley Alex Brandreth says the “ECB will have to fight more fires than it currently does” if the UK opted for a Brexit.
“Draghi and his ECB colleagues will likely have some sleepless nights in the run up to the UK’s EU referendum, as a Brexit would have far-ranging effects on both financial markets and politics across the Eurozone.”
Draghi confirmed that the monthly asset purchases of €80 billion, which start next Wednesday, are intended to run until at least the end of March 2017, and would be extended if required.
The targeted longer-term refinancing operations will start on 22 June.