The Latest: Draghi warns some euro states need to spend more
FRANKFURT, Germany (AP) — The Latest on the European Central Bank’s monetary policy meeting (all times local):
European Central Bank President Mario Draghi says that euro member countries need to be ready to use government spending to help support the economy.
Draghi said Thursday that if the economy worsens “fiscal policy would become of the essence.” He said that countries that are financially shaky should reduce their deficits but that those that can should look at how their spending could support growth.
He said that “monetary policy has done a lot to support the euro area.” Draghi did not mention any particular country but Germany, the largest eurozone member, has been running budget surpluses amid calls from some economists to spend and invest more.
Draghi spoke after the ECB indicated it could cut rates or buy more bonds to provide monetary stimulus to the economy.
European Central Bank President Mario Draghi says the eurozone’s monetary authority is ready to provide more stimulus because it is not willing to accept the current levels of inflation below its target.
Draghi said that the bank’s determination was enshrined in a reworded policy statement that underlined that the bank was ready to “adjust all its instruments” and was studying a new bond purchase stimulus.
Draghi told a news conference that there is “no question of accepting the inflation we see today.” Annual inflation is 1.3%, short of the ECB’s aim to have it just under 2%.
The bank could act at its next meeting Sept. 12 if things do not improve. Draghi said that studying new bond purchases means “we not only affirm our determination but we move a step forward.”
The European Central Bank could cut interest rates or signal it is close to doing so as it meets Thursday to discuss how to support the economy through uncertainties including trade wars and Brexit.
The ECB, which sets interest rates for the 19 countries that use the euro, is expected by many analysts to at least tweak its promise to keep interest rates at rock-bottom levels into next year. New wording would emphasize that the next move down the road could be a cut.
But a rate cut Thursday is not out of the question— even though one of the rate benchmarks is already below zero.
The meeting comes as central banks around the globe are moving, or at least preparing, to support the global economy.