Draghi Says QE To Remain Even As Inflation Outlook Raised

(RTTNews) - The European Central Bank's asset purchases are proceeding as planned and will continue until there is a sustained shift in the inflation path, ECB President Mario Draghi said Wednesday. He also reaffirmed the bank's view that Greece should remain in the euro area, as crucial talks between the country's government and creditors are due to take place in Brussels later in the day.

"The asset purchase programmes are proceeding well," Draghi said in the introductory statement during his customary post-decision press conference in Frankfurt.

"Our asset purchases of EUR 60 billion per month are intended to run until the end of September 2016 and, in any case, until we see a sustained adjustment in the path of inflation."

The Governing Council, led by Draghi, left key interest unchanged for a seventh consecutive session, earlier in the day. The main refinancing rate was held unchanged at a record low 0.05 percent and the deposit rate at -0.20 percent.

"When carrying out its assessment, the Governing Council will follow its monetary policy strategy and concentrate on trends in inflation, looking through fluctuations in measured inflation in either direction if judged to be transient and to have no implication for the medium-term outlook for price stability," Draghi said.

He acknowledged that ECB measures have contributed to a broad-based easing in financial conditions, a recovery in inflation expectations and more favorable borrowing conditions for firms and households in the euro area.

The effects of these measures are working their way through to the economy and are contributing to economic growth, a reduction in economic slack, and money and credit expansion, Draghi said.

"The full implementation of all our monetary policy measures will provide the necessary support to the euro area economy, lead to a sustained return of inflation rates towards levels below, but close to, 2 percent in the medium term, and underpin the firm anchoring of medium to long-term inflation expectations," he asserted.

Draghi also unveiled the latest ECB staff macro economic projections. The inflation forecast for this year was raised citing expected economic recovery, the impact of the lower euro exchange rate and expectations of somewhat higher oil prices in the years ahead.

The inflation projection for this year was raised to 0.3 percent from zero seen in March. The forecasts for next year and 2017 were maintained at 1.5 percent and 1.8 percent, respectively.

"The staff projections are conditional on the full implementation of all our monetary policy measures in place," Draghi said.

Growth projections for this year and next were retained at 1.5 and 1.9 percent, respectively. However, the prediction for 2017 was lowered to 2 percent from 2.1 percent.

"While remaining on the downside, the risks surrounding the economic outlook for the euro area have become more balanced on account of our monetary policy decisions and oil price and exchange rate developments," Draghi said.

The ECB Chief faced several questions on Greece from reporters, but he refused to comment on the ongoing negotiations between the Greek government and creditors, saying the talks are in 'a state of flux'.

Greek Prime Minister Alexis Tsipras and top EU leaders are set to hold crucial talks in Brussels later in the day to hammer out a deal that would pave the way for unlocking aid to the cash-strapped country.

The Governing Council wants Greece to remain in the Eurozone and seeks a strong agreement that "produces growth". The Greek economy is viable if right policies are implemented, he said.

Draghi also revealed that he will not be joining the meeting in Brussels, due Wednesday evening.

Answering reporters, he admitted that ECB had expected stronger euro area growth figures for the first quarter. He said growth momentum slowed because of weakness in economies outside the single currency bloc.

Regarding any exit from its $1.1 trillion quantitative easing, Draghi said there no discussion on such a move yet.