European Central Bank President Mario Draghi on Thursday signaled the bank could further ease its monetary policy as early as March amid growing concerns over faltering global economic growth which have caused huge volatility in financial markets.
The bank left interest rates on hold on Thursday. No new policy changes had been anticipated this meeting of the bank's monetary policy committee, but analysts had predicted that recent market volatility could have forced the bank's hand to provide more policy support in the not-too-distant future.
ECB President Mario Draghi told reporters at a press conference that downside risks had increased at the start of the year. "It will therefore be necessary to review and possibly reconsider our monetary policy stance at our next meeting in March."
The euro fell against the dollar following the comments, dropping below $1.08 for the first time in two weeks, while European stocks turned higher.
"What was expected to be a dull first meeting of the year, turned out to be an exciting ECB meeting with ECB president Mario Draghi opening the door widely for new ECB action in March. While today's ECB meeting will again feed bold speculations about what could happen in March, the question remains whether Draghi will really be able to deliver on his promise," Carsten Brzeski, senior economist at ING DiBA said.
At its previous meeting in December the bank said it was widening the range of its trillion-euro bond-buying program and extending the duration of the program to March 2017 (and possibly beyond). It also cut the deposit rate further into negative territory.
Draghi said the measures the bank announced in December were "significant", but circumstances had changed since then.
The credibility of the ECB would be harmed by not reviewing its policy stance in March, he said, adding there was "no limit" to action within its mandate.