ECB president says he is ready to act in March if necessary – Investing.com Spain

BRUSSELS / FRANKFURT (Reuters) – The European Central Bank is ready to relax its policy in March whether the recent financial market turmoil or long-term impact of lower energy prices threaten keeping with persistently low inflation, its president, Mario Draghi said Monday.

“First we will examine the strength of the effect of imported inflation low domestic wages and price formation and inflation expectations” Draghi said the Committee on Economic and monetary Affairs of the European Parliament.

“Second, in view of the recent financial turmoil, analyze the state of the transmission of our monetary impulses in the financial system and in particular in the banks, “Draghi said. “If either of these two factors will carry downside risks to price stability, not hesitate to act,” he said.

The comments Draghi occur after weeks of high volatility in the market has reversed much of the effect of monetary easing by the ECB in December, increasing pressure on the bank to be relaxed further in March.

Draghi said the bank will review and possibly recalibrate their policies when meets next on March 10, a sign that the markets taken as almost certain that serve commitment.

the euro has strengthened by 3 percent so far this year, while the bags eurozone are down 13 percent, increasing financing costs for companies.

But perhaps most important is the decrease of 22 percent in the banking sector, which can raise the cost of capital for banks, which could potentially stop the credit and reduce the effectiveness of unconventional measures of the ECB.

“the situation in the banking sector is now very different from 2012,” Draghi said. “Perhaps most importantly, banks in the euro zone have strengthened their capital positions in recent years, mainly as a result of the comprehensive evaluation undertaken in 2014,” he said.

But some banks still face difficulties from the uncertainties of litigation and restructuring costs to a high level of delinquency, Draghi said.

Draghi said the ECB was ready to act but also called on governments with fiscal policies that would help support to raise public investment and help the economy with lower taxes.

in December, the ECB cut its deposit rate by 10 basis points to 0.3 percent and extended its asset purchase plan in six months, bringing the program to 1.5 billion euros.

markets now discounted at least two rate cuts, bringing the rates on deposits to 0.5 percent by the end of the year from -0.3 percent. But analysts are more cautious and expect only a drop to 0.4 percent

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