Mario Draghi to Germany: ‘Just be patient’ on eurozone prices
“As the recovery will firm up, rates will go up as well,” the ECB president told reporters in Frankfurt yesterday after the governing council reaffirmed its intention to keep its bond-buying programme going until at least the end of the year.
Asked about German criticism of the strategy, he said: “The honest answer would be: Just be patient.”
German finance minister Wolfgang Schäuble earlier responded to the ECB’s decision by saying his government will face “political problems” explaining the policy to the public.
A surge in headline inflation last month in Germany, Europe’s largest economy, sparked a media outcry and calls for the central bank to pull back on its stimulus.
“I trust the ECB will always do the right thing,” Mr Schäuble said in an interview at the World Economic Forum in Davos in Switzerland.
He also warned that Mr Draghi’s loose monetary policy encourages leaders to delay the structural economic reforms the region needs, saying, “you give the political leaders some way to go around”.
Mr Draghi noted that the rise in consumer prices in Germany, as with the eurozone, is so far largely driven by oil prices, and officials will ignore gains that they see as transient.
“There are no convincing signs yet of an upward trend in underlying inflation,” he said.
“The governing council will continue to look through changes in inflation if judged to have no implications for the medium-term outlook for price stability.”
While the eurozone inflation rate almost doubled in December to 1.1%, the strongest since 2013, that’s still well below the goal of just under 2%. Core price growth, excluding energy and food, only edged up to 0.9% from 0.8%.
Mr Draghi said the rise in inflation rate had to meet four conditions to be consistent with ECB’s goal of just below 2%.
“We didn’t even discuss high-class problems,” he said, adding that when the time is right “then we will have to have a very deep, very careful discussion and analysis of the situation, but we are not there”.
In their first policy decision of the year, ECB officials reaffirmed their December decision that asset purchases will be reduced to €60bn a month from April, from €80bn currently.
Policy makers also kept the main refinancing rate at zero and the deposit rate at minus 0.4%.
Bloomberg
