The European Central Bank (ECB) is “ready to do its part” to shore up the region’s economy, its president said on Monday, indicating the possibility of more stimulus measures from the central bank next month.
In a speech to European parliament, Mario Draghi said the ECB will pay close attention to risks emanating from weak emerging market growth, the slide in oil and other commodity prices and the turbulence in global financial markets.
“First, we will examine the strength of the pass-through of low imported inflation to domestic wage and price formation and to inflation expectations,” Draghi said, according to Reuters.
“Second, in the light of the recent financial turmoil, we will analyze the state of transmission of our monetary impulses by the financial system and in particular by banks,” he added. “If either of these two factors entail downward risks to price stability, we will not hesitate to act.”
The comments came as ECB has missed its inflation target of close to 2 percent for three straight years.
Policymakers fear that a failure to get prices rising again would erode public confidence in the bank, rendering monetary policy ineffective and leaving Europe stuck in a trap of zero price growth, Reuters noted.
Weeks of heightened market volatility has reversed much of the impact of the ECB’s December easing, increasing pressure on the bank to ease further in March.
Dismissing criticism that the ECB is running out of ammunition, Draghi said the central bank has enough instruments on hand and that quantitative easing is flexible enough.
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