ROME (Reuters) - The European Central Bank will keep interest rates low and stands ready to take additional unconventional policy actions if inflation expectations do not pick up, ECB President Mario Draghi said on Wednesday.
In a speech to university students in Rome, Draghi said the ECB’s combination of ultra-low interest rates and balance sheet expansion had created “an unprecedented degree of monetary accommodation”.
Echoing his comments after last week’s ECB policy meeting, he said the ECB would take “further unconventional policy actions should medium-term inflation expectations worsen or if the measures already decided on prove to be insufficient”.
Draghi stressed that euro zone interest rates across all maturities were now “lower than they have ever been and also lower than in the United States, which we are often compared with.”
But he said monetary policy on its own could only do a limited amount and for the effects to be felt in the real economy, banks had to do more to help lending. Governments also had to encourage investment and make the structural reforms needed to improve competitiveness and cut unemployment.
“It is clear that both demand- and supply-side policies are necessary,” he said, noting that private investment in the euro zone had fallen by 15 percent since 2007 and public investment by 12 percent.
Sometimes diverging from a prepared written text, Draghi urged euro zone governments not to be afraid of losing national sovereignty, saying it was “not a question of losing sovereignty but sharing it in a larger grouping.”
“The lesson of 2012 has taught us that the crisis of confidence in the euro was also caused by uncertainty about the future of the single currency which turned out to be unfounded,” he said.
Students in the audience loudly protested when Draghi, who had begun by saying how much he enjoyed speaking to university students, left immediately after his address and refused to take any of their questions.
Outside the university, a small group of less than a hundred students shouted slogans against the ECB, disturbing speakers as the conference proceeded.
reporting by Gavin Jones, writing by James Mackenzie and Gavin Jones; Editing by Ruth Pitchford