Deniz Kılınç / İstanbul, June 18 () – European Central Bank (ECB) President Mario Draghi defended the bank’s existing policy tools, noting that they still have headroom and added that it could cut interest rates again or provide further asset purchase if the inflation target is not reached.
Draghi tried to reassure the investors about the bank’s ability to act about the increasing doubts on the real effect of monetary policy if a new recession takes place. Speaking at the ECB Forum, Draghi said:
“The (European) Treaty requires that our actions are both necessary and proportionate to fulfil our mandate and achieve our objective, which implies that the limits we establish on our tools are specific to the contingencies we face. If the crisis has shown anything, it is that we will use all the flexibility within our mandate to fulfil our mandate, and we will do so again to answer any challenges to price stability in the future.”
The ECB revised earlier this month its interest rate expectations, adding that its first-post crisis rate hike is unlikely to come before mid-2020. The hawkish stance showed the central bank is doubtful about economic recovery in the region.
Draghi also pointed out the different options that the ECB has available:
“Further cuts in policy interest rates and mitigating measures to contain any side effects remain part of our tools. And the asset purchase program (APP) still has considerable headroom.”
Following Draghi’s comments, euro fell by 0.22 against the dollar to1,1192 dollars at 10:39 CET.