European Central Bank president Mario Draghi spoke from Barcelona today following the bank’s latest monetary policy decision.
The ECB decided to hold rates steady at 1.00 per cent for the sixth month in a row, surprising no one.
That said, investors watched Draghi’s remarks closely for a handful of things:
- Hints of a future rate cut as the economy deteriorates.
- Talk of restarting purchases of individual countries’ debt through the Securities Markets Programme in order to keep sovereign borrowing costs low.
- The bank’s disposition to do another massive liquidity operation (like the two three-year LTROs) in the future.
- More details on the nature of the “growth pact” Draghi has proposed to rejuvenate European economic activity.
Overall, they were sorely disappointed, as Draghi repeatedly called upon governments to take more action to fix economic imbalances and failed to outline specific plans for a “growth pact” he has been endorsing recently.
The ECB has been the primary driver of economic activism in the euro area after two three-year long-term refinancing operations that significantly lowered the rates at which troubled sovereigns pay to borrow and eradicated the immediate possibility of a banking sector collapse.
However, continued economic deterioration has just shifted and delayed threats, and investors are concerned that other EU leaders won’t act fast enough to prevent the state of banks in Spain and Italy—the scariest part of the euro crisis—from deteriorating beyond repair.
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