🔥 Premium AI-powered Stock Picks from InvestingPro Now up to 50% OffCLAIM SALE

Draghi Says Fiscal Boost Could Allow ECB to Raise Rates Sooner

Published 10/02/2019, 01:33 AM
Updated 10/02/2019, 04:12 AM
© Reuters.  Draghi Says Fiscal Boost Could Allow ECB to Raise Rates Sooner

(Bloomberg) -- Mario Draghi said looser budget policies complementing the European Central Bank’s monetary stimulus would augur a quicker end to ultra-low interest rates, lessening the damage they cause.

“Fiscal policy playing a more supportive role alongside monetary policy would lead to a faster return to price stability and therefore fewer side effects,” the ECB president said in Athens on Tuesday.

The remarks provide a different take to a persistent theme of the ECB president during his final months in office, calling for European governments who can afford to loosen purse strings to do so in support of economic growth. Draghi told reporters at his most recent press conference that “it’s high time for the fiscal policy to take charge.”

“Fiscal policy becomes more powerful when monetary policy is close to the effective lower bound, as the multipliers are higher,” the ECB president said. “Furthermore, in certain situations, supportive fiscal policy can complement monetary policy in cutting through the obstacles that are weighing on demand -- which is the case in the euro area today.”

Draghi also built on other recent comments calling for enhanced coordination of budget policies in the euro region, while reiterating his insistence on more spending. He said that net public investment in all large euro countries “has essentially been zero over the last decade.”

“Monetary policy will continue to do its job,” Draghi said, referring to the ECB’s recent, and controversial, decision to ramp up stimulus including quantitative easing to combat slowing growth. “If fiscal and structural policies also play their role in parallel -- and more so than we see today -- the side effects of monetary policy will be less, and the return to higher rates of interest will be faster.”

Draghi was in Athens attending a ceremony to be admitted to the Academy of Athens, Greece’s highest research institution.

Latest comments

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.