Following today`s rate decision which an expected cut to interest rate by 25 basis points to a record low of 0.50 percent, ECB President Mario Draghi said in the press conference following the decision that the ECB took a number or decisions to enhance the flow of credit and left the door open to further monetary easing. Draghi revealed that the governing council also took a number of decisions on way to enhance credit; the ECB will continue fixed rate, full allotment or “main refinancing operations” until mid-2014, referring that the 3-month loan to be linked to benchmark. Draghi said he took “initiatives to promote a functioning market for asset-backed securities collateralized by loans to non-financial corporations.” “Our monetary policy will remain accommodative for as long as needed” and officials “will monitor very closely all incoming information” in the months ahead, Draghi said.
He also clarified that today’s decision is consistent with the low price pressure. To explain further the ECB’s decision, he pointed to the weakness in the economy by stating that monetary and loan environment remains subdued while the weak economic sentiment has extended into the spring. The interest rate cut could support the euro area to get on the track recovery later in the year, where last month he said the bank will keep monetary policy loose for a while, leaving the door opened in front of possible further easing if economic conditions showed deteriorations. He echoed that growth risks remains to the downside, where short-term data signals weak economic activity and fragileness in labor market, where there are “continued tight credit conditions,” especially for small and middle-sized companies.
Yet, the improvement in financial market conditions should weigh on the economy, leading it to stabilization by the second half of the year in a gradual manner as exports start to benefit from stronger global demand. European Commissioner Olli Rehn attended today’s monetary decision, Draghi said. Taking a part into the austerity versus growth debate taking place between European leaders, Draghi said euro area nations should continue working on lowering their borrowing needs, blaming the current situation to the high taxes in some countries which weighed on demand. As a response to questions about the late timing of the rate cut and other aforesaid decisions, he said the ECB has been doing efforts which managed to boost stock markets and force yields to decline.