European Central Bank President Mario Draghi says that the bank has yet to consider implementing so-called helicopter money in the eurozone
“The bottom line is, we haven’t discussed it” Draghi said when asked about the policy.
He added that the ECB “hasn’t really thought or talked about” helicopter money and that it is “fraught with legal and institutional difficulties.” He was asked about helicopter money twice, and gave the same answer in both cases.
Draghi spoke to the press following the bank’s latest monetary policy decisions, announced on Thursday afternoon.
The bank left all of its main rates unchanged in a move widely expected by the markets. The current deposit rate in the eurozone is -0.4%.
Helicopter money — which involves creating new money and giving it directly to people to spend on whatever they want — has been widely discussed by banking analysts and in the media in recent weeks, but Draghi extinguished any hopes of its implementation any time soon.
While he ruled out helicopter money, Draghi did hint that the ECB could cut rates even more in the near future, saying that the bank continues “to expect them [interest rates] to remain at present, or lower, levels for an extended period of time – and well past the horizon of asset purchases.”
Along with deflecting any possibility of helicopter money any time soon, Draghi also answered questions on a variety of topics, ranging from the potential effects of Brexit on the eurozone, all the way to criticisms of the ECB by German politicians. Here are some of the highlights:
- On Brexit: Draghi acknowledged that uncertainty surrounding Brexit has had an effect on the pound, but said he does not see it as a threat to the eurozone’s recovery. He added that neither he, nor anyone from the ECB will speculate on the possible result of the UK’s EU referendum. He described Britain’s membership of the EU as being mutually beneficial.
- On German criticisms: Asked out criticism from Germany, Draghi was clear in the ECB’s stance, saying “We obey the law, not politicians, because we are independent.” German officials, particularly finance minister Wolfgang Schauble, have criticised the ECB’s stimulus measures in recent weeks, questioning its independence, and even, at one point, blaming ECB policies for helping the rise of the right-wing Alternative for Germany party. Draghi did however say that recent talks with Schauble in Washington DC were “very positive, fruitful and I would say quiet, and very friendly.”
- On structural reforms to eurozone economies: Draghi once again reiterated his desire for politicians and economists in Europe’s largest economies to make structural reforms, saying pointedly that “With rare exceptions, monetary policy has been the only policy in the last 4 years to support growth.”
- On the ECB buying corporate bonds: Draghi confirmed that the ECB will buy bonds from all non-banks above an unspecified credit rating of any maturity up to 30 years. The ECB confirmed that bonds must be rated above BBB-, and that buying will start in June.
- On growth in the eurozone: Eurozone growth would have been 1.6% lower than it will be by the end of 2016, had the ECB not implemented its current monetary policies during 2014, Draghi said. Inflation would be in negative territory, he added.
In his prepared remarks Draghi struck a fairly gloomy tone, saying that despite a small recovery in economic conditions since the bank’s last meeting, risks to the recovery are still “tilted to the downside” warning that inflation could turn negative in coming months. However, the bank still expects inflation to pick up in 2017, he added.
Despite being cautious about the recovery, Draghi said that the ECB’s fiscal measures are doing their job. “Overall, our measures in place since June 2014 have clearly improved borrowing conditions for firms and households.”