Hello and welcome to today’s live blog for European Central Bank president Mario Draghi’s first press conference of 2013.
Mr Draghi will begin speaking at 13.30. All times are UK time.
14.40 The live blog is now closed.
14.38 The ECB president struck a very upbeat tone at today’s presser.
Mr Draghi is clearly delighted with the recent developments in financial markets (see 13.46), though he warned against complacency on the part of governments and added that we were yet to see any signs of an economic recovery.
Because markets were a lot more positive, the governing council was unanimous in deciding to hold rates and no-one even bothered to discuss the option of a cut, which now looks unlikely to happen in the coming months.
14.30 The questions end. Recap to follow.
14.28 Contagion is now working in the eurozone’s favour. “There is a positive contagion when things go well and that’s what’s in play now,” he says.
Despite the recent progress made, however, Draghi say DON’T relax. Which is all well and good, but it doesn’t make for a decent t-shirt does it?
He urges governments to keep up the good work and continue to implement structural reforms.
14.27 Not everyone has tuned into the Oscars announcement (see 13.32); the euro has climbed since Super Mario began speaking so FX traders have certainly noted the ECB president’s more upbeat stance. Here’s Alice Ross’s take on the euro’s appreciation.
Alice Ross: The euro neared $1.32 against the dollar on Thursday after the European Central Bank kept interest rates on hold and signalled a more positive outlook for the eurozone.
The single currency gained 1 per cent to touch $1.3195 after the ECB kept its main refinancing rate at 0.75 per cent. The euro continued to climb as Mario Draghi, ECB president, forecast that the eurozone would return to growth this year and said the decision not to cut interest rates further had been unanimous.
14.21 The ECB doesn’t need to have something like the Bank of England’s Funding for Lending scheme, Mr Draghi says, because it already has the three-year longer-term refinancing operations.
Following BoE governor Sir Mervyn King’s recent comments on currency wars, Mr Draghi makes the following remark: “The exchange rate is certainly an important element as far as growth and price stability are concerned, but it’s not a policy target,” he says, adding that the euro is near its long-term average level.
14.18 Mr Draghi offers his take on why unemployment in the eurozone is so high.
He says that certainly some element of eurozone unemployment is down to structural factors (note that monetary policy can do little to lower structural unemployment rates).
The fact that youth unemployment rates are so high signals that there are dual labour markets, where the young have little protection and older workers a lot of protection. “We know that is so because since [labour market] flexibility was introduced in 2000, it was concentrated in young part of population. So when the crisis came they were the first ones to lose their jobs,” Mr Draghi says.
He also notes that European workers don’t tend to move to areas where there are more jobs.
14.09 Mr Draghi has been in a rather more positive mood today than in recent months. However, he cautions that problems remain. Particularly in the real economy.
“We are now back in a normal situation from a financial viewpoint but we’re not at all seeing an economic recovery,” Mr Draghi says.
Most of the recent financial market movements have been down to “a normalisation of conditions”, not over-exuberance. However, there are signs of over-exuberance in some sectors he says, specifically in some overvaluations in certain private equity deals and leveraged buy-outs.
The downside risks to growth stem from lack of action from the governments on the fiscal side. “Not only that fiscal consolidation is essential, but it must be implemented in a balanced way. Structural adjustment the only thing that matters for imbalances in the euro-area,” the ECB president says.
13.59 Besides a rate cut, it would appear in the coming months we’re also unlikely to see another longer-term refinancing operation (which the ECB uses to flood the market with liquidity). “Funding conditions right now are satisfactory. I don’t think that’s what the problem is,” Mr Draghi says.
13.55 For those of you keen to read Mr Draghi’s opening remarks in full, here they are. For those just after a round-up, see 13.41
13.52 Mr Draghi confirms that a rate cut wasn’t even discussed at the January meeting.
13.46 The decision to hold was unanimous, Mr Draghi says. This was because of the improvement in financial market conditions, he adds.
He lists a series of improvements: falling bond yields, strong capital inflows, an increase in deposits in periphery banks, a fall in Target2 balances, and a shrinking of the ECB balance sheet. “Fragmentation is being gradually repaired but all of this hasn’t found its way through to the real economy yet,” Mr Draghi says.
So it doesn’t look like a rate cut is on the cards in the short term, at least.
There was also a question on whether Ireland could access the OMT on the back of its recent bond sale. Mr Draghi swerves it.
13.42 The questions begin. The first one: was a rate cut discussed?
13.41 From the opening statement.
The outlook on inflation and growth is broadly unchanged from December. Growth will pick up later this year, medium-term inflation expectations remain in line with the ECB’s target of below but close to 2 per cent. Risks to the inflation outlook are “broadly balanced”.
The ECB president is bullish on market confidence, saying that it has improved “significantly”.
13.32 The ECB president has just taken his seat and begins delivering his opening remarks.
Super Mario is up against stiff competition, however. The Oscar nominations announcement is also starting now…
13.27 The FT’s currencies correspondent Alice Ross reckons most FX analysts don’t expect an ECB cut in the coming months.
13.15 Hello and welcome to the live blog. The ECB’s governing council opted to keep policy on hold, as the majority of analysts had expected. However, will there be hints of a rate cut in the coming months from Mr Draghi at today’s presser?
Here’s the FT’s Frankfurt bureau chief Michael Steen on today’s decision.