European Central Bank president Mario Draghi has given a firm statement in favour of maintaining interest rates at zero per cent to continue to boost Eurozone inflation towards its two per cent target rate.
In a statement to the European Parliament, he said: “We remain committed to preserving the very substantial degree of monetary accommodation necessary to secure a sustained convergence of inflation towards levels below, but close to, 2% over the medium term.”
Eurozone inflation remains well below this target, at 0.5 per cent. Draghi made it clear that this was still the main driver behind ECB monetary policy.
“The return of inflation towards our objective still relies on the continuation of the current, unprecedented level of monetary support, in spite of the gradual closing of the output gap,” he said.
Draghi also joined other central bankers around the world, including US Federal Reserve deputy chair Stanley Fischer, in renewing calls for governments to support growth through investment spending.
“Fiscal policies should also support the economic recovery, while remaining in compliance with the fiscal rules of the European Union. For instance, a more growth-friendly composition of fiscal policies could boost growth,” said Draghi.
He also said that the ECB's policies had "strongly supported the recovery" by encouraging credit creation. Low interest rates make lending by banks more attractive.