ECB president Mario Draghi has ruled out cutting rates any further in the short term after the central bank elected to cut all of its main rates, and add corporate bonds to its asset purchase program on Thursday afternoon.
At a press conference, Draghi suggested that he believes the bank’s new measures should be sufficient to get the European economy back on track, saying: “We don’t expect it to be necessary to reduce rates further” although he also pointed out that “facts can change” when it comes to the markets.
Draghi wouldn’t confirm whether or not the ECB’s governing council had been unanimous in supporting today’s decisions, but said that there was an “overwhelming” majority in favour.
Speaking in Brussels, Draghi described the new policies as “comprehensive” and said that he hopes they will help boost inflation in the eurozone to levels just below 2%, the ECB’s key target.
Alongside the measures, the ECB also released its latest economic projections on Thursday, downgrading its 2016 GDP expectations for the euro area to 1.4%, while growth is still expected to come in at 1.7% in 2017. GDP growth is now expected to hit 1.8% in 2018.
Inflation expectations, however, were slightly downgraded, with 2016’s expectations now just 0.1%. That will pick up next year though, hitting 1.3% in 2017, and 1.6% in 2018.
Draghi also reiterated his believe that eurozone countries need to increase fiscal spending, and carry out “structural reforms” — something he has frequently called for at past ECB meetings.
Draghi pointed to the ECB’s belief that interest rates will stay at their current levels or lower for an extended period of time.
During the question section of the conference, Draghi was asked if the ECB was “overreacting” when it comes to the rate cuts and extension of bond buying programmes, but said that they were an “adequate reaction to weakening growth.”
He also defended the bank against accusations that they are running out of options to boost growth, saying “We are not short of ammunition.”
Speaking about the expansion of the ECB’s targeted long-term refinancing option (TLTRO) programme, Draghi said that he expects “a very sizeable take-up for the second TLTRO given the recovery and the very attractive conditions”. Last week, Credit Suisse warned that a low uptake of TLTRO’s in future could show that the ECB had run out of ammo.
Investors seem to be entirely unsure what to make of the ECB’s suite of measures, and Draghi’s comments, meaning that assets are all over the place as a result. After the bank’s initial statement, the euro plunged as much as 1.4%, before jumping into positive territory by as much as 1%, and then falling again.
Here’s the euro’s rollercoaster ride on Thursday afternoon:
Stocks were also up and down, with certain European indexes jumping as much as 4% initial, before paring those gains to around 2%. The Stoxx 600 broad index is up 0.89% at 3:10 p.m. GMT (10:10 a.m. ET).