European Central Bank chief Mario Draghi pledges indefinite stimulus to revive Eurozone economy

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By Oleksandra Vakulina  with Reuters
European Central Bank chief Mario Draghi pledges indefinite stimulus to revive Eurozone economy

Seven years ago, in the very midst of the Eurozone sovereign debt crisis, Mario Draghi promised to do "whatever it takes" to preserve the euro.

He now adds one more vow - to do it for as long as necessary.

In what is seen as another turning point for Europe and the euro area, Draghi today announced fresh stimulus measures.

The European Central Bank (ECB) has cut the deposit rate to 0.5%. That means that banks will be forced to pay more for leaving bank deposits overnight with the ECB.

But in a new carrot-and-stick approach, for banks who are lending more - "the part of banks' holdings of excess liquidity will be exempt from the negative deposit facility rate".

The ECB also re-starts quantitative easing at a monthly pace of €20 billion as of November 1.

All these measures are supposed to stimulate inflation, which is far from the ECB target of close but below 2%, and ultimately - support growth, which is now set to slow down to just 1.1% this year and 1.2% next year.

This is lower than ECB's forecast just two months ago at the June meeting.

Draghi, ECB president, said: "These risks mainly pertain to the prolonged presence of uncertainties related to geopolitical factors, the rising threat of protectionism, and vulnerabilities in emerging markets."

At first, the euro fell to its lowest level in more than a week and this didn't go unnoticed.

US President Donald Trump tweeted saying "The ECB is trying, and succeeding, in depreciating the Euro against the VERY strong Dollar, hurting US exports. And the Fed sits, and sits, and sits."

Draghi rejected this claim: "We stick with the G20 consensus. Namely, that we will never pursue competitive devaluation. So we expect that all the G20 members would underwrite the same consensus."

Christine Lagarde is taking over as the ECB head on November 1st and she will then have to find her own way of "doing whatever it takes to preserve the euro".