The European Central Bank will
begin to buy "simple and transparent" asset-backed securities
and covered bonds in October to try to encourage credit flows to
the economy, President Mario Draghi said Thursday.
During a news conference, Draghi announced that the central
bank was also cutting its main interest rates for commercial
banks amid reduced forecasts for economic growth and inflation.
He also urged governments to work harder on structural
reforms in their economies to boost overall growth in the
eurozone.
"These efforts now clearly need to gain momentum to achieve
higher sustainable growth and employment in the euro area,"
Draghi said in a prepared statement.
And if they are not enough, the central bank stands
prepared to use "additional unconventional instruments in its
mandate," he added.
The ECB cut its economic growth forecasts for this year and
next, but slightly increased its 2016 growth expectation while
warning that its inflation outlook this year will be reduced.
Growth will average 0.9% this year, down from earlier
forecasts of 1.0%, and 1.6% in 2015 instead of 1.7% as earlier
predicted; but in 2016, growth will be 1.9% instead of earlier
forecasts of 1.8%.
Inflation will average 0.6% this year and 2015's forecast
is unchanged, said Draghi, who also pledged the ECB will
continue to "be vigilant on inflation risks" that come from weak
economic growth, the exchange rate of the euro single currency
and "the geopolitical situation".
Low and falling inflation in many European countries has
raised concerns about persistent deflation.
Last month, eurozone inflation averaged 0.3% - well below
the ECB's target rate of just under 2%, which it judges to be
the rate that reflects economic growth at just the right speed,
neither too fast nor too slow.
The central bank also cut its main refinancing interest
rate to 0.05% on Thursday from the previous level of 0.15% to
try to boost the struggling economy in the eurozone.
As well, the ECB reduced other rates affecting commercial
banks depositing funds at the central bank.
By lowering these rates, the ECB is hoping that commercial
banks will, in turn, reduce the interest rates they charge to
businesses and consumers.
Draghi also said that flexibility is built into the
European Union's stability pact, words that may comfort Italian
Premier Matteo Renzi who has urged the EU to allow greater
flexibility on its budget.
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