Draghi says ECB to purchase securities in October

(ANSA) - Rome, September 4 - 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.