Draghi Prepares ECB Bond Purchase Plan

As Eurozone inflation slows to lowest rate in four years, ECB president expresses support for "both unconventional and conventional" responses.

Mario Draghi said the European Central Bank (ECB) might start broad-based asset purchases if the inflation outlook worsens as he prepares the ground for one of the most radical policies in the ECB’s history.

“The objective here would not be to defend the current stance, but rather to increase meaningfully the degree of monetary accommodation,” the ECB president said in a speech in Amsterdam today. “The Governing Council is committed—unanimously—to using both unconventional and conventional instruments to deal effectively with the risks of a too-prolonged period of low inflation.”

Draghi said that the ECB doesn’t see broad-based deflation risks, while adding that a stronger euro exchange rate does threaten the outlook for prices.

“A rise in the exchange rate, all else being equal, implies a tightening of monetary conditions, a downward impact on inflation, and potentially a threat to the ongoing recovery,” he said. “If so, this would call for policy action to maintain the current accommodative stance.”

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