ECB began effective purchases of public debt

European Central Bank (ECB) will start buying public debt of Monday (9th March 2015), said the president of the institution Mario Draghi during the traditional press conference following the meeting of the bank on Thursday. Earlier in the day ECB expectedly kept its key interest rate at a record low of 0.05%. Furthermore, the European Central Bank maintained also the rate on the marginal lending facility at 0.30%. The interest on deposits was even preserved in the negative value of -0.20%.

All three rates were lowered for the last time in September 2014. Since then, several of the most senior managers of the bank indicated that interest rates are unlikely to be lowered further, as it would have no significant impact on the economy. As Draghi announced in January, the combined monthly asset purchases by the ECB will amount to 60 billion EUR by the end of September 2016. The program can be terminated early and if the bank sees the desired correction of inflation upwards . The purpose of central bankers is a level of below, but close to 2%.

“We are already seeing a significant number of positive effects of these decisions on monetary policy. Financial market conditions and cost of external financing for the private economy further eased since the previous monetary policy measures. In particular, the conditions for loans to companies and households improved significantly. Furthermore, money supply and credit developments are accelerated”, said the president of the ECB - Mario Draghi. “Turning to the monetary analysis, the latest data confirm the gradual increase of the underlying growth of broad money (M3). The annual growth rate of M3 increased to 4.1% in January 2015 compared with 3.8% in December 2014. The annual M3 growth continues to be supported by the most liquid components, such as the narrow monetary aggregate M1 grew at an annual rate of 9% in January”, added he in front of Finance Feeds Journal

The ECB President recalled that monetary policy is to maintain price stability in the medium term and support economic activity. He however reiterated that “it is crucial that structural reforms can be implemented quickly, reliably and effectively as this (monetary policy). Can not only enhance the future sustainable growth of the eurozone”.

“The detailed examination of the economic analysis and the signals coming from the monetary analysis confirms the relevance of the recent decisions of the Executive Board. Definitely implementation of our monetary policy measures will provide support to the euro area recovery and send inflation to levels below, but close to, 2% over the medium term”, added Draghi in his expose.

The ECB expects inflation in the euro area remain critically low in the next few months. According to the latest forecasts of the economic team of the institution consumer price growth will be zero in 2015. The new estimate is significantly different from those presented in December last year, expectations for growth in consumer prices of 0.7%.

For 2016 bank raised its inflation forecast to 1.5%, compared with the previously expected 1.3%. For 2017 does include the ECB forecasts a rise in consumer prices of 1.8%, which fully meet the targets of the regulator.

Expectedly EUR took down more after Draghi’s statement. The single EUR currency is now trading at 1.1013 USD.