The European Central Bank (ECB) has indicated that it is planning to introduce new measures to stop stagnation across the eurozone. The bank’s president Mario Draghi has played down speculation that there are serious disagreements between central bankers over how to deal with slowing growth.
Mr Draghi reiterated his commitment to stimulating the European economy, saying: "The governing council will closely monitor and continuously assess the appropriateness of its monetary policy stance. Should it become necessary to further address risks of too prolonged a period of low inflation, the governing council is unanimous in its commitment to using additional unconventional instruments within its mandate.”
Interest rates will stay at their current historic low of 0.5 percent.
Disagreement
Tensions have been rising between Mr Draghi and other central bankers. He has played down rumours of a rift developing between the north and the south of the continent.
Mr Draghi has been openly expressing his preference for a large scale quantitative easing programme. Head of the German central bank, Jens Weidmann, has vocally opposed the idea, claiming that it would not fix Europe’s economy. The German says that structural reforms are needed, not aggressive monetary policies.
Unconventional Measures
Pressure is mounting on Mario Draghi and the ECB. There is widespread uncertainty over what “unconventional instruments” he is willing to use and when he will bring them into play.
With the forecast for the European economy remaining bleak, it does look like a major stimulation package will be needed. The most recent figures from the European Commission predict that euro zone economies will grow by just 0.8 percent this year, down from a previous estimate of 1.2% in spring.
This picture does not look like improving. The Commission forecasts that eurozone economies will expand by only 1.1 percent next year, and 1.7 percent in 2016.
The ECB are already acting to avoid deflation. It has started pumping money into the banking system, aiming to boost its balance sheet by 1 trillion euro.
