ECB Is Sticking to Its Ultra-Loose Monetary Policy

As expected, the European Central Bank (ECB) has announced to make no changes to its key interest rates and bond-buying programme. In its latest decision, the ECB has, however, taken into account the persistently high growth rates in the eurozone as well as the increased inflation rate. ECB President Mario Draghi expects the economic growth prospects in the eurozone to improve even further. Dr. Michael Schröder comments on the ECB’s decision:

“With the ECB sticking to its ultra-loose monetary policy, there is no sign of a change of strategy at the moment. As usual, Mario Draghi justifies the decision by pointing to the ECB’s smoking gun, core inflation, which, after recent downward revisions, remains far below the two-per-cent target of the ECB. It is therefore understandable that the ECB has decided to make no changes for the time being and Draghi is pressing for further necessary structural reforms in eurozone countries. In light of the real economic growth in the eurozone, this line of argumentation is, however, becoming more and more flawed.

The ECB’s loose monetary policy is associated with a number of risks. In the banking sector, negative effects have already become evident in terms of reduced interest margins and potential risks for financial market stability. The longer the ECB refrains from normalising monetary policy, the smaller becomes the scope for adjustment in case of a financial crisis.

Today, only a short time after the French presidential elections, more and more voices are calling for the ECB to assume a stabilising role in the upcoming presidential elections in Italy. The ECB can and must not become the central authority responsible for ensuring political stability in the Member States.”

For further information please contact

Dr. Michael Schröder,, Phone: +49 (0)621/1235-368, schroeder@zew.de