Draghi sees strong recovery unlikely soon

(ANSA) - Rome, November 21 - Warning of "excessively low" inflation across the eurozone with no sign of economic recovery, Mario Draghi, president of the European Central Bank, said Friday that the ECB stands ready to take dramatic action.
    Analysts read that as a pledge to take bold measures including significantly more bond purchases, perhaps even buying government bonds - a controversial notion opposed by Germany.
    In remarks to a banking conference in Frankfurt, Draghi noted that recent economic data, including Thursday's purchasing managers index, did not deliver good news.
    "(The PMI) suggests a stronger recovery is unlikely in the coming months, with new orders falling for the first time since July 2013," said Draghi.
    "In this context, the inflation situation in the euro area has become increasingly challenging," he added.
    Although the ECB aims its policies at holding inflation at around 2%, the consumer price index has been hovering barely above zero.
    In October, the average annual inflation rate across the 18-member eurozone was just 0.4%, suggesting growth is so sluggish that price pressures hardly exist.
    Draghi noted that one year ago, headline inflation was just 0.9% - low, but not as weak as current levels. The ECB has begun purchasing asset-backed securities (ABS) in inject liquidity into the eurozone economy as well as well as buying covered bonds.
    Another measure it introduced has been providing loans at very low interest rates to commercial banks on condition the banks pass these on to customers as another way to trying to stimulate growth and inflation.
    Draghi acknowledged Friday that more such efforts will be needed.
    "Contingent on outcomes, we are committed to recalibrate the size, pace and composition of our purchases as necessary to deliver our (inflation) mandate," he added.
    "This is why the (ECB) Governing Council has tasked ECB staff and the relevant Eurosystem committees with ensuring the timely preparation of further measures to be implemented, if needed".
    Italian Economy Minister Pier Carlo Padoan on Friday said he was pleased by Draghi's commitment.
    During an interview with Sky News, Padoan said "the real problem" in the eurozone is sluggish economic growth.
    "We all need to do more, even governments," added Padoan. Financial markets have been looking to the ECB to begin the sort of drastic action as the United States Federal Reserve took in its massive quantitative easing (QE) programs.
    Draghi referred directly to those programs, noting that the ECB will do "all we have to do to raise inflation and inflation expectations as fast as possible".
    He added that if current monetary policy is not effective enough "we will increase the pressure further expanding the channels through which we intervene". Italy's benchmark 10-year bond dropped to near historic interest rate lows, reaching 2.21% in reaction to Draghi's remarks.