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No need for rate change says ECB's Draghi

Thursday, March 07, 2013 - 01:08

Mar. 7 - ECB chief Draghi says European Central Bank is in no rush to take action after Italy's inconclusive election result. (Rough cut - no reporter narration).

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(ROUGH CUT - NO REPORTER NARRATION) (SOUNDBITE)(English) ECB PRESIDENT MARIO DRAGHI, SAYING: "Markets after some excitement immediately after the elections have now reverted back, more or less, to what they were before. You have seen certainly that the contagion to other countries has been muted this time, contrary to what might have happened about a year and a half ago. And this is another positive sign. Based on our regular economic and monetary analysis we decided to keep the key ECB interest rates unchanged. A gradual recovery should commence in the second part (of 2013) with export growth benefiting from a strengthening of global demand and domestic demand being supported by our accommodative monetary policy stance. OMT remains, is in place. It is a very effective backstop, and it is there. But you know the rules and as I said, the ball is in the government's hands." Markets have settled quickly after Italy's fractured election result and any threat of contagion has been muted, the European Central Bank's president said on Thursday, suggesting it is in no rush to take any action. Italians delivered a strong rejection of austerity measures at elections last week and left no party grouping with enough support to form a lasting government, raising the prospect of backsliding on economic reforms and debt-cutting measures. The ECB has calmed the euro zone crisis with its pledge to buy government bonds in potentially unlimited amounts but it will only do so if a struggling member country seeks helps from the bloc's rescue fund and agrees to austerity conditions, after it held interest rates at a record low 0.75 percent. The programme, dubbed Outright Monetary Transactions (OMT), is yet to be introduced and Italy could find itself outside the ECB's umbrella if it cannot form a government prepared to adhere to the ECB's rules. A Reuters poll of economists showed uncertainty stemming from Italy's election makes it more likely the ECB will have to help struggling countries by buying their bonds at some point. But the poll sees Spain, not Italy, as the most likely recipient. The euro climbed to a session peak against the dollar after Draghi gave no strong hint about monetary policy easing in the months ahead. The ECB lowered its forecast for the euro currency bloc in 2013. Gross domestic product is expected to fall by between 0.1 and 0.9 percent this year, below a previous range of -0.9 to +0.3 percent. The ECB has singled out the uneven transmission of its record-low interest rates across the currency bloc as its main problem, which begs the question as to whether a rate cut would have much effect.

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No need for rate change says ECB's Draghi

Thursday, March 07, 2013 - 01:08