The European Central Bank says its flood of cheap long-term loans to eurozone banks is helping them substantially and ECB President Mario Draghi believes that the policy is supporting confidence in the region’s economy as it starts to show some signs of stabilisation in the midst of the debt crisis.
However Draghi admitted that things still look grim: “Ongoing financial market tensions continue to dampen economic activity in the euro area, while, according to some recent survey indicators, there are tentative signs of stabilisation activity at low levels. The economic outlook remains subject to high uncertainty and substantial downside risk.”
At its latest monthly meeting the ECB left interest rates on hold at a record low 1.0 percent; policymakers are pausing to assess the impact of back-to-back cuts and a slew of other measures it unleashed late last year.
At his news conference Draghi again pushed the region’s governments to “rigorously” pursue deficit reduction, but also stressed job creation must be a primary objective in their economic policies “through structural reforms”.
In the current weak economy, Draghi said inflation pressures probably remain subdued.
In December eurozone inflation stood at 2.8 percent, down from November’s 3.0 percent.