Emily Cadman Closed Live blog: Draghi takes questions

Welcome to our live coverage of ECB president Mario Draghi monthly press conference. Earlier the ECB kept its benchmark interest rate on hold at its record low for the sixth month in the row, despite weaker than expected inflation. Follow the questions and reaction live here with capital markets editor Ralph Atkins and economics reporter Emily Cadman.

The European Central Bank has left eurozone official interest rates unchanged. There was no surprise there. Financial markets were not expecting any action – but they will watch today’s press conference carefully for indications about the likelihood of new policy measures in coming months. Mario Draghi, ECB president, faces a strengthening euro, which is adding to downward pressure on already low inflation rates. If he disappoints markets, the euro may go higher. It is already testing the $1.40 level.

The press conference should start in a few minutes. The ECB’s governing council met in Brussels – one of the two meetings it holds each year outside its home city of Frankfurt, Germany.

Here is Claire Jones’ take on the decision European Central Bank keeps interest rates on hold

Mr Draghi has started. The ECB remains ready to “act swiftly” if needed, he says. Interest rates are expected to remain low for “an extended period of time”. And the governing council is “unanimous” in its commitment to using unconventional measures if necessary. Those are all repeats of statements made last month.

Just as Draghi starts talking, the euro goes higher:


A new addition: Mr Draghi says more information about the strength of bank lending to the private sector will be available in June. That could have been a hint about the ECB buying up bank loans to small businesses, especially in the crisis-hit eurozone periphery countries.

ECB latest inflation projections are more or less in line with previous statements. Inflation, Mr Draghi says, is expected to remain near to current low levels in coming months, before rising “only gradually” during 2015 to “levels closer to 2 per cent” towards the end of 2016. The ECB’s target is an annual rate “below but close” to 2 per cent.

For ECB geeks, the addition of “only” to the line about inflation increasingly “only gradually” in 2015 is a new.

Mr Draghi repeats that exchange rate developments will continue to be monitored closely.

Mr Draghi is taking about improvements in eurozone credit conditions, but there have been no new policy steps announced in the introductory statement. We’re now onto questions.

Claire Jones of the FT has the first questions. She asks if there is total agreement within the ECB council about what a “prolonged period” of low inflation means. And what Mr Draghi thinks of French demands for action.

French ministers have repeatedly complained in recent weeks about the strength of the euro, with Manuel Valls, the prime minister, saying President François Hollande intends to take up the issue with his eurozone partners after this month’s European elections.

Mr Draghi says a “prolonged period” of low inflation becomes worrying, by his definition, when risks of inflation expectations becoming unanchored rise. “The longer is the period the bigger are the risks of a de-anchoring”.

One of the “pieces of advice” Draghi is referring to is the OECD’s call for the ECB to cut interest rates further. More from Economics Editor Chris Giles here: OECD urges European Central Bank to loosen monetary policy

The ECB president says he has received a lot of advice recently from politicians and institutions “on almost everything” He says (sarcastically?) “We are certainly thankful for this advice.” But he points out that the ECB is independent and critics should be aware that threats to its independence “could cause long term damage to our credibility”.

On the euro, Mr Draghi says the currency’s strengthening is a matter of “serious concern”. That is a significant stepping up of his verbal intervention.

The text of the introductory statement is now available on the ECB website.

Mr Draghi notes that eurozone economic growth remains weak – and that the stronger euro remains a “downside risk” to growth as well as inflation.

The ECB’s governing council is “comfortable with acting next time” he says. This is a surprise. A follow up question is asking for more details.

By the June meeting, the ECB will have updated its economic projections, the ECB president says.

The euro just fell immediately after Draghi’s surprise suggestion of action next month

Mr Draghi clarifies to say there is consensus within the ECB council about being “dissatisfied about the projected path of inflation” and that there is a consensus about not being resigned to this.” Hence there was also a “consensus” in favour of policy action in June, once fresh economic projections are available. But he has not given any clues about what that action might involve.

Euro is now below $1.39 after pushing close to the $1.40 mark

Mr Draghi is asked at what level he would consider the euro as being too high.

He replies that is difficult to talk about levels but repeats that a stronger euro “in the context of low inflation and still low levels of economic activity is a cause for serious concern. “


For more on how Draghi has talked down the Euro, take a listen to our currencies correspondent Delphine Strauss‘ Hard Currency podcast

The ECB president is also worried about political risks. If tensions over Ukraine escalate, the eurozone and Europe generally “is going to be impacted more than other parts of the world”.

The stronger euro “will have to be addressed” Mr Draghi adds

Mr Draghi is asked if yields on eurozone periphery government bonds have fallen too low. He says much of the inflows have been from outside the eurozone, which is “why we see a buoyant market for bonds throughout the euro area”.

The markets are certainly waiting for some action. Here is Aberdeen Asset Management’s Luke Bartholomew’s take:

ECB meetings are starting to have a Waiting for Godot feel: every month we think Draghi can’t go any longer without doing something and every month we’re left waiting.

This from the ECB’s former director general market operations:


Emerging markets have lost some of their appeal and the eurozone has won over investor confidence, Mr Draghi argued. Hence the inflows into eurozone periphery bond markets. But, he adds: the eurozone should be “extremely careful” not to think that this is a reason for relaxing.

Eurozone periphery countries – including Greece – show “clear signs of recovering,” Mr Draghi says. But they should not let up their reform programmes.

The impact on eurozone inflation of the Ukraine crisis will depend on its effects on energy prices, Mr Draghi says, but warns it is difficult to make any projections.

We’re on to fiscal policies. Mr Draghi is asked if there is scope for countries to delay fiscal austerity measures. He says this is more a matter for the European Commission, but that doesn’t stop him complaining about past rule breaches by Germany, France and Italy (his home country). “Undermining the credibility of existing rules is never a good policy that could generate growth”.

Has the ECB ditched its policy of not pre-committing to policy actions, Mr Draghi is asked. That, he says, “was finished a long time ago”.

A quick plug, before we end, from Mr Draghi for more European economic integration. “Our future lies with more integration, not a re-nationalisation of our economies”

That’s it. The press conference is over. The ECB did deliver a surprise. Mr Draghi said its governing council was “comfortable” with taking fresh policy action next month to act against a stronger euro and mounting deflation risks. That is a promise he will almost certainly have to keep. The ECB’s past policy of not “pre-committing” has been thrown out the window.

But the ECB president gave no clues about what that action would involve. Possibilities are a further interest rate cut or even some kind of asset purchase programmes. Right at the start of his introductory statement, Mr Draghi said more information would be available in June about the strength of bank loans to European businesses, which might have been a hint of action focused in that area. By June, the ECB will also have updated inflation and growth forecasts.

Market reaction in brief: before the press conference the euro had looked to be heading through $1.40. It ended firmly below that level. Eurozone periphery bond yields have also fallen further. Equities are not so impressed. The FTSE Eurofirst 300 index is up just 0.3 per cent on the day.