The head of the European Central Bank says the eurozone economy could be given a further dose of stimulus if Britain’s vote to leave the European Union starts to have a negative impact.
After the Bank’s latest policy meeting, Mario Draghi singled out the Brexit vote as a key risk, and spoke of uncertainty to the economic outlook.
He told reporters: “Our assessment is that euro area financial markets have weathered the spike in uncertainty and volatility with encouraging resilience. The announced readiness of central banks to provide liquidity if needed and our current monetary policy measures, as well as a robust regulatory and supervisory framework have all helped to keep market stress contained.”
Draghi: Financial markets have remained resilient despite Brexit, also thanks to ample liquidity— ECB (@ecb) July 21, 2016
The ECB now has until its September meeting to see exactly what the economic costs of Brexit are.
Draghi spoke after the ECB Governing Council kept its main interest rate at zero and continued quantitative easing – money printing to buy bonds – at around 80 billion euros a month.
He called that asset-buying programme “quite successful” and confirmed it would run until March 2017, or beyond if necessary, until the ECB sees an upward adjustment of inflation toward its target.
As well as Brexit he flagged up the risks from too-slow inflation and a looming banking crisis in Italy.
The ECB is concerned as it is the eurozone’s bank supervisor.
Italian banks, weighed down by about a 360 billion euros in bad debt and with their share prices falling.
The Italian government is in talks with the EU to allow state aid to the troubled lenders but wants to shield household investors, a contentious proposal that would test the bloc’s new bail-in rules.
Draghi repeated the ECB’s position that something needed to be done to address the problem of bad loans and also called public backstop in such case “useful” but said this was ultimately between Italy and the European Commission to work out.