ECB’s Draghi insists on need for continued accommodative policy

© Reuters.  Draghi says ECB convinced of need for extraordinary amount of monetary policy support© Reuters. Draghi says ECB convinced of need for extraordinary amount of monetary policy support – European Central Bank (ECB) president Mario Draghi said Monday that while the euro zone economy is improving, inflation remains subdued, requiring extraordinarily accommodative monetary policy.

In testimony to the Committee on Economic and Monetary Affairs of the European Parliament on Friday, Draghi commented that “the economic upswing is becoming increasingly solid” and “downside risks to the growth outlook are further diminishing.”

“The fact that domestic consumption and investment are the main engines driving the recovery makes it more robust and resilient to downside risks, which relate predominantly to global factors,” he added.

Nevertheless, the ECB president insisted that underlying inflation pressures have remained subdued.

“Domestic cost pressures, notably from wages, are still insufficient to support a durable and self-sustaining convergence of inflation toward our medium-term objective,” he said, insisting that the euro area needs financing conditions that are “very accommodative”.

“At its June monetary policy meeting the Governing Council will receive an update of the staff projections and a more complete information set on which it will be able to formulate its judgement on the distribution of risks around the most likely outlook for growth and inflation,” Draghi stated.

“Overall, we remain firmly convinced that an extraordinary amount of monetary policy support, including through our forward guidance, is still necessary for the present level of underutilized resources to be re-absorbed and for inflation to return to and durably stabilize around levels close to 2% within a meaningful medium-term horizon,” he said.

The ECB will make its next policy on June 8 with markets widely expecting no changes.

After publication of the speech, traded at com 1.1179 compared to 1.1184 ahead of the report, while was at 0.8704 from 0.8708 earlier.

Meanwhile, European stock markets were trading lower. The dropped 0.05%, Germany’s inched up 0.03%, while France’s lost 0.08%. London’s was closed for a bank holiday.

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