FRANKFURT, Dec 6 (Reuters) - The European Central Bank held interest rates at a record low of 0.75 percent on Thursday, leaving investors to shift their attention to new economic forecasts for clues about possible cuts next year.
Following are comments by ECB President Mario Draghi at a news conference after the ECB’s policy meeting.
“We are operationally ready, but the discussion didn’t go into any depth with respect to this point. We briefly touched upon the complexities that such a measure would involve and possible unintended consequences, but we didn’t elaborate any further.”
“The Governing Council continues to see downside risk to the economic outlook for the euro area. These are mainly related to uncertainties about the resolution of sovereign debt and governance issues in the euro area, geopolitical issues and fiscal policy decisions in the United States, possibly dampening sentiment for longer than currently assumed and delaying further the recovery of private investment, employment and consumption.”
“There was a wide discussion ... but the consensus was to leave the rates unchanged.”
“If you think from July to today, some countries’ spreads or some countries’ sovereign bonds went down by 200, 250 basis points, that is much more than anything you can achieve by a reduction in the short-term policy rate. So to some extent, we will continue looking at the situation, of course, but to some extent, we have already done much that is needed.”
”On Greece, now you say that too much has been asked from the private sector but my impression is actually the opposite - a lot has been asked from the public sector. This whole programme is being financed ... by the public sector with public sector money.
“So the debt buyback will be part of this and it’s early to say how it’s going but ... I would say it is mostly public sector involvement in terms of new money, also what is most important (for) this latest agreement is the medium-term term commitment to possibly provide new money in case Greece were to have a primary surplus but somehow things were not going, not because of Greece’s lacking compliance with the programme ... So this is quite important (and) it’s the first time this has been done, actually.”
ON THE ECB‘S OMT BOND-BUYING PLAN
”The conditions under which the OMT is going to be activated are very straight... they don’t talk about negotiations or a certain interest rate or anything like that ... The press communique of the OMT contains all the conditions that are needed to activate it.
“We said ... the main aim of the OMT is to remove tail risk to overcome monetary and financial fragmentatiobn of the euro area that would stem from redenomination risk and we would do it in a size that would be adequate to achieve its objective.”
ON POSSIBLE DEAL SOFTEN THE TERMS OF IRELAND‘S BANK BAILOUT
”(Wednesday’s budget) was a reaffirmation of the successful commmitment of the Irish goverment in restoring sound economic conditions, both fiscal but more broadly structural conditions.
“The ECB cannot undertake any agreement that is being viewed as monetary financing (which is) forbidden by article 1,2,3 of the (ECB’s founding) treaty. Other than that, there is plenty of goodwill.”
“We didn’t really have a deep discussion about that. We certainly discussed about this and we basically haven’t reached a conclusion yet.”
“It is essential for governments to reduce further both fiscal and structural imbalances and to proceed with financial sector restructuring.”
“We have also decided to continue conducting our main refinancing operations, MROs, as fixed-rate tender procedures with full allotment for as long as necessary and at least until the end of the sixth maintenance period on July 9, 2013.”
“Later in 2013, economic activity should gradually recover as global demand strengthens and our accommodative monetary policy stance and significantly improved financial market confidence work their way through the economy.”
”We decided to keep the key ECB interest rates unchanged owing to high energy prices and increases in indirect taxes in some euro area countries.
”HICP inflation rates have been elevated for some time. More recently, they have declined as anticipated and are expected to fall below 2 percent in 2013.
“Over the policy-relevant horizon, inflation rates should remain in line with price stability.”
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