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ECB chief opens door to QE

Friday, November 21, 2014 - 02:22

ECB chief Mario Draghi opens the door even wider for radical action to rescue the euro zone economy, telling a banking congress in Frankfurt that ''excessively low'' inflation had to be raised ''as fast as possible''. David Pollard reports.

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Some call the ECB chief's remarks the most dramatic in years. (SOUNDBITE) (English) ECB PRESIDENT, MARIO DRAGHI, SAYING: "We will do what we must to raise inflation and inflation expectations as fast as possible, as our price stability mandate requires of us ... If on its current trajectory our policy is not effective enough to achieve this, or further risks to the inflation outlook materialise, we would step up the pressure and broaden even more the channels through which we intervene, by altering accordingly the size, pace and composition of our purchases." The ECB has already embarked on a programme of buying assets and offering cheap loans to banks. But few doubt even more radical action is needed. Last week, GDP numbers surprised by showing Germany escaping recession. But only just. This week, data shows Germany's private sector at its lowest growth rate in 16 months, no growth at all in manufacturing. Across the euro zone, new orders fell - those orders down despite firms cutting prices again. Manoj Ladwa, Head of Trading at TJM. (SOUNDBITE) (English) HEAD OF TRADING AT TJM PARTNERSHIP, MANOJ LADWA, SAYING: ''I think QE is the remedy for the near-term for the euro zone. We have got a deflationary issue there and the central bank, the European Central Bank, needs to do something to reflate economies across Europe as well. But the problem is that it may be too little, too late.'' But some point to a history of Draghi boosting sentiment with talk, not deeds. Andrea Williams is a fund manager at RLAM. SOUNDBITE (English) ROYAL LONDON ASSET, SENIOR FUND MANAGER, ANDREA WILLIAMS, SAYING: ''I think the problem he has is that he has a toolbox as it were and the final tool is QE. And I still think there is a political resistance to it, particularly from the Germans. He's playing a game of biding his time and hoping that the second LTRO, which comes in December might get some stimulus. The euro, weaker euro, might begin to help GDP growth and I think he's very reluctant to press that full-scale QE although the market wants him to." Other issues continue to bubble under - like Greece. It's pushing ahead with budget plans for next year, a move likely to set in on a collision course with EU and IMF lenders. It says it won't add any more of the austerity measures that have sparked wave after wave of anti-government protest. Its lenders say Athens will miss its deficit target.

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ECB chief opens door to QE

Friday, November 21, 2014 - 02:22