ECB monetary policy has "regained steering power", and Draghi stands ready to act with standard and non-standard measures

European Central Bank president Mario Draghi has been speaking at the Bank of Israel this morning. He noted that the central bank is open to “non-standard” policies, and that it stands” ready to act if necessary”.

Recent signs of improved stability in the eurozone – including declining economic and financial fragmentation and restored access to capital for banks in stressed countries – also means that monetary policy has “regained steering capacity” lost in mid-2012, and the ECB will remain accommodative for as long as needed.

On non-standard measures (including the outright monetary transactions programme, which he defends again), he says,

At the same time, I have also made clear that some of those measures may have unintended consequences. This does not mean that they should not be used, but it does mean that we need to be aware of those consequences and manage them appropriately. We will look with an open mind at these measures that are especially effective in our institutional setup and that fall within our mandate.

He stresses that the central bank continues to be committed to its central tenets, in particular: separation of power and objectives between authorities, and adherence to “an open market economy with free competition, favouring an efficient allocation of resources”.

The euro fell against the dollar on the news. Head of research at FX Pro Simon Smith said:

But Deltahedge thinks the markets are overreacting: