ECB Keeps Interest Rates, Stimulus Plan Unchanged -- 4th Update
January 19 2017 - 9:38AM
Dow Jones News
By Paul Hannon and Todd Buell
FRANKFURT--European Central Bank President Mario Draghi Thursday
said policy makers will "look through" a recent pickup in the
annual rate of inflation if they're not convinced it will be
sustained.
The annual rate of inflation in the eurozone rose to 1.1% in
December from 0.6% in November, the fastest rate of price growth
since September 2013. In Germany, the eurozone's largest member,
prices rose by 1.7%.
The December jump brought inflation closer to the ECB's target
of just below 2%, suggesting policy makers may soon have reason to
reconsider their December decision to extend their bond-buying
program to the end of this year.
However, the pickup in inflation has been almost entirely due to
a stabilization and, more recently, an increase, in energy prices,
and policy makers don't appear to be convinced that a sustained
rise to target can be assumed.
"Underlying inflation pressures remain subdued," Mr. Draghi
said. "The governing council will continue to look through changes
in inflation if they are judged to be transient and to have no
implication for the medium term outlook for price stability."
Mr. Draghi was speaking in a news conference following a
decision by the ECB's governing council to leave its main interest
rates unchanged. The central bank reiterated that it would continue
to make asset purchases at EUR80 billion ($84.21 billion) a month
until the end of March and then at EUR60 billion a month from April
to December, "or beyond, if necessary."
European stocks saw a rebound when Mr. Draghi said the ECB would
stand ready to expand quantitative easing. The euro turned lower
against the U.S. dollar as investors detected a dovish slant to the
ECB president's opening statement. The euro fell to a low of
$1.0603, below a rate around $1.0665 before he started
speaking.
Mr. Draghi also set a high bar for meeting the inflation target
in a way that would satisfy policy makers.
"It has to be a durable convergence, it cannot be transient," he
said. "It has to be self sustained ... it has to stay there even
when the extraordinary monetary policy will not be there."
Write to Paul Hannon at paul.hannon@wsj.com and Todd Buell at
todd.buell@wsj.com
(END) Dow Jones Newswires
January 19, 2017 09:23 ET (14:23 GMT)
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