ECB ready for QE, inflation expectations anchored for now - Draghi
WASHINGTON (Reuters) - European Central Bank President Mario Draghi reiterated on Thursday that the bank was ready to start quantitative easing to deal with risks of low inflation, but noted that for now inflation expectations were anchored at the ECB's target.
In a statement for a meeting of the International Monetary and Financial Committee in Washington, Draghi also said that the central bank would closely monitor the impact on inflation from geopolitical risks and exchange rate developments.
"Recent information remains consistent with our expectation of a prolonged period of low inflation that will be followed by a gradual upward movement in consumer prices during 2015 to reach levels closer to 2 percent towards the end of 2016," Draghi said in the speech.
The main reason behind the inflation slowdown was the fall in the prices of energy and unprocessed food.
"At the same time, medium to long-term inflation expectations remain firmly anchored in line with our definition of price stability," he said, adding both upside and downside risks to the outlook for inflation were limited, and broadly balanced over the medium term.
"In this context, the possible repercussions of geopolitical risks and exchange rate developments will be monitored closely," said Draghi.
He reiterated the statement from last week that the ECB's Governing Council did not exclude further monetary policy easing and that the key ECB interest rates would remain at present or lower levels for an extended period of time.
"This expectation is based on an overall subdued outlook for inflation extending into the medium term, given the broad-based weakness of the economy, the high degree of unutilised capacity and subdued money and credit dynamics," he said.
"The Governing Council is unanimous in its commitment to using also unconventional instruments within the ECB's mandate in order to cope effectively with risks of a too prolonged period of low inflation. At the same time, it is closely following developments on money markets," he said.
(Reporting By Jan Strupczewski; Editing by Andrea Ricci)
