Draghi: Bond Buying Program More Essential Than Ever
An "accommodative" monetary policy is still appropriate for the European Central Bank, whose OMT bond-buy plan is essential now as policy shifts elsewhere reverberate across the globe, ECB President Mario Draghi said.
In remarks prepared for delivery in Berlin, Draghi defended the bond-purchase plan - dubbed Outright Monetary Transactions (OMT) - that he masterminded last year to head off the risk of a euro zone break-up, saying the bloc is more stable as a result.
"Indeed, I would say that OMT is even more essential now as we see potential changes in the monetary policy stance with associated uncertainty in other jurisdictions of the integrated global economy," he said in the speech for delivery on Tuesday.
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Draghi's remarks were a thinly veiled reference to the U.S. Federal Reserve's plans for exiting its ultra-loose monetary measures. The Fed is the first of the world's major central banks to lay out such a plan.
The ECB has yet to activate the OMT, which it is defending in Germany's Constitutional Court after more than 35,000 Germans filed complaints against the program that allows it to buy up the debt of stricken euro zone member states.
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Draghi stressed that governments must commit to reforms for the ECB to activate the plan, adding that 'core' euro zone countries like Germany had benefited from the program as it had lowered the risks of a break-up and the associated costs.
The ECB saw some signs of stabilization in sentiment in the euro zone economy, though uncertainties remained, Draghi said.
"In terms of monetary policy, price stability is assured, and the overall economic outlook still warrants an accommodative stance," he added.
"And we expect that monetary stimulus and improvements in financial markets will support a recovery later in the year."
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Pressing governments to do more to tackle the euro zone crisis, he said monetary policy is "only a small part of the overall policy agenda for overcoming the crisis".
He urged governments to pursue structural reforms and growth-friendly fiscal consolidation, and to forge ahead with their plans for a European banking union.