Mario Draghi defends ECB policy

A day after kicking off yet another ECB stimulus review, Mario Draghi tried to convince investors he will do what is needed to reignite consumer prices.

“We’ve plenty of instruments. We have the determination, and the willingness and the capacity of the governing council, to act and deploy these instruments,” the ECB president said yesterday at the World Economic Forum in Switzerland.

The comments reflect the ECB’s agreement to re-examine its strategy of a €1.5tn bond-purchase plan and negative interest rates.

“It’s a bit like Groundhog Day,” said Carsten Brzeski, chief economist at ING-Diba AG in Frankfurt.

“The only question is, will he fulfill the dreams of markets this time around, or will he disappoint again?”

ECB executive board member Benoit Coeure, who is responsible for the central bank’s market operations and who was a key architect of quantitative easing, reiterated the pledge on a separate panel at Davos.

“We are very committed” to returning inflation to the goal of just under 2%, he said.

The euro is set for its biggest weekly drop this year as traders brace for more stimulus.

The currency traded at $1.08 yesterday and is down about 1% this week.

Draghi’s challenge has become tougher as China’s economic slowdown increasingly drags on global trade and disrupts markets.

Euro-area inflation was 0.2% last month and hasn’t been near the goal since early 2013.

The ECB president said the three current drivers of the euro-area recovery are monetary policy, a fiscal stance that is “broadly neutral if not slightly expansionary,” and lower energy prices that support disposable income.

Yet policy- makers are worried over the risk that ultra-low inflation will persist, undermining the economic revival.

“There’s less reason to be optimistic” over the outlook for consumer prices, he said.

“It’s mostly because of the collapse in oil prices but also because of the revision, the downward revision” of economic growth in emerging markets.

Meanwhile, the IDA and Taoiseach Enda Kenny hosted an event for over 50 executives from some of the world’s largest companies at the Davos summit to try and drum up further foreign direct investment.

IDA and representatives of the Taoiseach’s department also met about 20 existing client companies to discuss expansion.