European Central Bank (ECB) governor Mario Draghi has hit out at the policies of US President Donald Trump, rejecting deregulation and protectionism as well as claims Germany is manipulating the euro.
Draghi also reiterated the ECB’s commitment to its expansive monetary policy, telling MEPs at the European Parliament the central bank was ready to increase the pace of its quantitative easing programme of bond buying if necessary.
Risks to the Eurozone economy “remain tilted to the downside and relate predominantly to global factors,” Draghi said, before referencing protectionism. He said: “We look with worry about the potential announcements of protectionist measures.”
He also explicitly criticised the President’s policy of rolling back regulations on the financial sector which were introduced in the aftermath of the financial crisis.
“The last thing we need at this point in time is a relaxation of regulation,” he said. “The idea of repeating the conditions that were in place before the crisis is very worrisome.”
Trump campaigned on an “America First” platform before the election, and since his inauguration has scrapped proposed trade deals, while promising to remove “job-killing regulations”, including the Dodd Frank banking regulations.
Meanwhile Draghi rejected accusations from Trump’s trade adviser that Germany manipulates the euro to “exploit” the US. Draghi quoted a US Treasury report that rejected the assertion.
“We are not currency manipulators,” he said, while explaining expansionary monetary policy reflects “the diverse positions in the economic cycle” of EU states.
Draghi also rejected criticisms of the ECB’s expansionary monetary policy, saying it will “look through” headline inflation “if we believe they do not durably affect the medium-term outlook for price stability”.
Dissent has been building within the ECB’s rate-setting governing council, with some northern European nations including Germany experiencing a rapid acceleration in inflation.
“It has to be an inflation rate that refers to the whole Eurozone,” Draghi said, with less influence from “transient” effects on inflation from volatile components such as oil.
Oil prices have risen considerably since November when the Organization of the Petroleum Exporting Countries (Opec) cut production. However, core inflation, which does not include volatile elements, remains below one per cent in the Eurozone.
Draghi committed to a further decline in unemployment before tightening monetary policy as the Eurozone's growth continues "firming up".
"The evidence suggests that the acute deflation risks have disappeared and that inflation is set to pick up over the coming years," he said.