ECB Head Ready to Ease Monetary Policy

 

European Central Bank President Mario Draghi told the European Parliament’s Economic and Monetary Affairs Committee that the ECB could decide to ease its monetary policy when it meets again in March. It is expected that this announcement might cause US markets to rally on Tuesday, the day after the US holiday of President’s Day, which is when Draghi’s speech was delivered.

Draghi said that when the central bank meets it will analyze how effective its monetary policy has been and how it has effected the general financial system, especially for banks. He added that the ECB will “not hesitate to act” to control inflation if they see any risks to price stability.

Increased volatility in global markets during the first two months of 2016 has heightened pressure on investors. They are worried that a slowdown in those markets could lead to a major recession in some of the world’s largest economies, including the US and Europe.
Draghi countered these fears by stating that the regulatory overhaul which was established after the Eurozone debt crisis, led to better, more durable foundations and resilience for the banking industry. Basically, he said, the situation today is not the same as back in 2012 during the crisis.

“Banks have built higher and better-quality capital buffers, have reduced leverage and improved their funding profiles… in 2015, the banks under ECB supervision further increased profits relative to 2014. This allows banks to have appropriate distribution policies while still meeting regulatory capital requirements and buffers, and to support lending to the economy,” he said.

Michelle Grathers

About Michelle Grathers

Michelle Grathers is an international tax expert. She has consulted for a variety of firms and high net worth individuals on all tax- and legal-related issues. She also helps new companies develop payroll services, statutory audits and mergers and acquisitions. Contact Michelle at michelle[at]businessdistrict.com