VALLETTA, Malta (AP) — European Central Bank head Mario Draghi says the bank will need to look at expanding monetary stimulus at its December meeting in order to raise inflation and boost the eurozone’s spotty economic recovery.
That could be an occasion to increase or extend the current 1.1 trillion euro ($1.2 trillion) stimulus program or to take other new and unspecified measures.
Draghi reiterated that the stimulus effort, consisting of monthly bond purchases of 60 billion euros, would continue at least through September, and longer if needed.
“We are ready to act if needed,” he said. He said bank officials were tasked with looking at all possible monetary tools.
The comments pushed the euro sharply lower, as more stimulus tends to weigh on a currency. The euro fell from above $1.1300 before Draghi’s comments to $1.1196.
He said the bank’s governing council had “a very rich discussion” and was “open to a whole menu of monetary policy instruments.”
The ECB has already cut its benchmark interest rate to a record low of 0.05 percent. The bank left it there, and has said that’s as low as it can go.
Draghi said, however, that one tool that was discussed Thursday was a potential further cut in the rate charged to banks to leave money on deposit at the central bank. The rate is already negative 0.2 percent.
The bank’s stance was not “wait and see” but “work and be ready.”
The Eurozone economy grew 0.4 percent in the second quarter but unemployment remains high at 11.0 percent. Draghi said that Eurozone demand seemed resilient but that trouble in emerging markets, particularly China, posed risks that could push the bank to act.
The ECB is stimulating the eurozone economy by buying bonds from banks with newly created money, in hopes they will expand credit. The aim is to boost growth and inflation, which is way too low at minus 0.1 percent.
DAVID McHUGH STEPHEN CALLEJA
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McHugh contributed from Frankfurt, Germany
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